Braemar Shipping Services PLC Edison initiates on Braemar Shipping Services
May 24 2022 - 5:44AM
RNS Non-Regulatory
TIDMBMS
Braemar Shipping Services PLC
24 May 2022
London, UK, 24 May 2022
Edison initiates on Braemar Shipping Services (BMS)
Braemar recently completed a corporate transformation that will
see it move away from being a widely spread shipping services
company, to grow into a clearly focused shipbroking operation.
Allied to the transformation is the company's growth strategy,
supported by growing global trade, and shipping's status as the
most energy-efficient and lowest carbon method of freight
transport, that has management focused on doubling the business
inside four years. We value the shares at 400p, a c 40% premium to
the current price, but see greater upside as evidence of success is
delivered over the next two to three years.
Braemar is trading on a P/E of 10.1x in FY23e, a material
discount to the only other quoted shipbroker, Clarkson, which
trades on c 18x in FY22e. We believe such a large differential is
unjustified as it gives no credit for the growth ambition and
proven ability to execute, suggesting upside in Braemar's rating.
We value Braemar at 400p/share based on a dividend discount model
with a 7.25% cost of capital and a growth rate of 5.5%. This
valuation implies a P/E of c 17x, a c 5% discount to Clarkson, and
a terminal growth rate of c -5% in our DCF model. Furthermore, we
believe there is upside to earnings forecasts and the potential for
a re-rating of the shares, which would suggest a higher valuation
than 400p is possible if management can successfully deliver the
growth strategy.
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