Despite an improved showing in the second quarter Yang Ming, Taiwan’s second largest containerline, remains high risk, according to a report out today from Drewry Maritime Financial Research.
Sales grew by 20% year-on-year for Yang Ming in Q2 with volumes up 7% to 1.15m teu. The line however remained in the red, with a net loss of NT$445m ($14.6m). This was a notable 91% improvement over the same period in 2016, and 51% better than in the first quarter of the year. Nevertheless, Drewry researchers remain concerned at Yang Ming’s huge debt burden, hence its high risk categorisation.
Total debt at Yang Ming stood at NT$84.2bn ($3bn) as of the end of Q2, pushing Yang Ming’s net gearing up to 444%, significantly higher than the 313% recorded in the same period last year. The Drewry report also noted that cash on the balance sheet stood at NT$12bn ($395m), which has almost halved compared to the beginning of last year.
Looking ahead, the Drewry analysts questioned how Yang Ming would finance the delivery of five 14,000 teu ships due for delivery in 2019 and 2020.
“We believe the company needs to take more sizeable steps to restructure its long-term debt before we review our stock recommendation on the company. As it stands, we continue to maintain our Unattractive stance on YMM’s common stock, given our thesis that liner operators with significant debt burden and lack of scale will struggle to survive,” the report by DMFR stated.
With container shipping going through unprecedented consolidation over the past two years Yang Ming, now the world’s eighth largest liner with a 2.8% market share, has regularly been tipped as an M&A candidate, something officials at its Keelung headquarters have consistently denied.
Despite the persistently negative coverage of Yang Ming’s financial status its stock price has shot up this year, more than threefold, closing today on NT$15.80.