Against the Tide

PSSI has registered another decline in revenues to US$42.7 million in 6M24 vs. US$53.3 million in 6M23, particularly due to the weaker revenues in Q1/24. In Q2/24 however, revenues have improved from US$20.7 million in Q1/24 to US$22.1 million, but still lower than US$25.8 million seen in Q2/23. At the bottom line, the Company’s core net profit has also shrunk sharply from US$30 million in 6M23 to US$9.3 million in 6M24. Similarly, compared to Q1/24 and Q2/23, core net profit was also lower at US$4.1 million. Consequently, core net profit margin (cNPM) has declined from 56.4% in 6M23 to 21.7% in 6M24, as well as down from 25% and 41.9% in Q1/24 and Q2/23, respectively to 18.6% in Q2/24. It is likely that this year PSSI will face a tremendous challenge to keep its top and bottom lines at par with FY23.

Segments' Margins Weakened Broadly

Segment-wise, the floating loading facilities (FLF) segment remains the biggest revenues contributor for the Company, followed by motor vessels (MV) segment and the tugboat & barges (T&B) segment. Still, on year-on-year basis, all segments have underperformed in 6M24, with T&B having the biggest drop by 36.3% (yoy) in terms of revenues. The segment’s margin has also shrunk significantly from 42.8% in 6M23 to 23.4% in 6M24. The FLF segment fared no better as its revenues plunged by 18.9% (yoy) in 6M24 whilst its margin edged lower from 37.8% to 33.5%. Only the MV segment saw less severe drop in revenues and margin in 6M24 vs. 6M23. Overall, all-segment margin has slipped to 32.9% in 6M24 from 39.6% in 6M23. Quarter-to-quarter comparisons have also underlined the weakness of Q1/24 against Q2/24 in addition to the stronger performance of the MV segment vs. other segments. With the exception of the FLF segment, both T&B and MV segments have been improving in Q2/24 from Q1/24, but compared to Q2/23, only MV segment’s performance has improved whilst the others saw contraction.

Stable Fleet Size, Less Capex

On its capital expenditures (capex), PSSI has spent another US$2.44 million in Q2/24 after in the previous quarter it had spent US$3 million. Overall, the total capex spent in 6M24 has amounted to US$5.44 million, which was less than US$7.31 million it had spent in 6M23. According to the Company’s website, its fleet currently consists of two FLF, 31 tugboats, 26 barges, five bulk carrier MVs, and two floating cranes. Compared to the previous list of fleets, one floating crane had been sold in Q2/24, which is reflected on the increase on PSSI’s cash proceeds obtained from sales of fixed assets and assets held for sale from US$1.8 million in 3M24 to US$4.7 million in 6M24.

Recalibrating the Target Price

Since our previous update in September last year, PSSI’s share price has dropped significantly to Rp398 per share last June before it drifted higher to the current price of Rp434 per share. Weak performance in 1H24 has been behind the pressure although the Company’s recent dividend payment has somewhat put a cushion to it. Nevertheless, to reflect the latest financial performance of PSSI, we have made updated our valuation of its shares. Due to significantly lower revenues and core net profit (cNP) vs. last year, we have revised the target price from Rp618 in our previous update to Rp 422 per share. This target price implies 7.0x PER (TTM), 1.5x PRR (TTM), and 0.8x PBV (MRQ), and is actually less than the current price of Rp434 per share. Consequently, our recommendation is HOLD as the shares are now considered to be fairly priced.