Bahri’s Q2 below estimates, dividend under pressure: Al Rajhi Cap

National Shipping Company of Saudi Arabia’s (Bahri) Q2 2017 net profit (SAR 154 million) came in slightly below Al Rajhi Capital’s estimate of SAR 210 million, and well below the consensus forecasts’ of SAR 310 million.

Bahri is facing multiple headwinds such as lower tanker rates, a rise in oil prices year-on-year leading to no-profitable contango (thus eliminating floating storage arbitrage) and higher bunker prices amid weaker demand for tankers following the OPEC output cuts, Al Rajhi Capital said in an earnings review.

The brokerage firm said it expects average tanker rates to decline 30 percent YoY rather than the 25 percent in the current year.

Therefore, it cut Bahri’s revenue forecasts by 4 percent for 2017 and 2018 each, as well as its net profit estimate by 7 percent and 10 percent for 2017 and 2018, respectively.

While Bahri has offered high dividend yield for investors over 2015 and 2016, dividend is expected to be cut to SAR 1.5 per share this year, due to pressures on operating profitability and cash flows.

Al Rajhi Capital maintained its “neutral” rating for the stock, cutting the stock’s target price to SAR 33 from SAR 38.6.