drybulkshipping-110322

7/27/2019 DryBulkShipping-110322

1/11

Please read carefully the important disclosures at the end of this publication.

SECTOR UPDATE

22 March 2011

UNDERWEIGHT Maintained

Dry Bulk ShippingAt the mercy of Chinese and Japanese woes

REGIONAL

Raymond Yap CFA +603 2084 9769 - [email protected] / John Tang +852 2532 1112 [email protected]

Maintain UNDERWEIGHT. The drop in capesize and panamax rates last weekreflected not only the steel mill and coal-fired power plant shutdowns in Japan butalso reduced iron ore demand in China due to tightening credit availability. Thesmaller vessel classes appeared immune, benefiting from grain shipments. Weremain UNDERWEIGHT because of the substantial overcapacity even thoughmedium-term demand will rebound with Japanese reconstruction. We areUnderperforms on STXPO (TP: S$11.90), PSL (TP: THB18.00), and Maybulk (TP:RM2.50) and are Neutral on TTA (TP: THB23.70) and Pacific Basin (TP: HK$5.63).

Drop in capesize rates mirror worries in China... A 15% wow drop in averagecapesize TCE and a 1.7% drop in the panamax average TCE dragged the BalticDry Index down 2% last week. But it would have been worse if the supramax andhandysize rates had not risen 3-3.7%. Lower demand for iron ore and coal fromboth China and Japan contributed to the falls. In China, iron ore demand has beenconstrained by the lower availability of credit to finance production at the steel mills,high steel inventories and falling steel prices. Steel mills in China began destockingover the past few weeks and the spot price of iron ore has declined 14% since lateFebruary. In the short term, some restocking demand can be expected. However,the medium-term outlook looks poor because property prices are expected to dropas government measures to dampen real estate demand through lower margin offinancing and administrative quotas take effect. Developers such as China Vankeand China Evergrande Real Estate are already cutting prices.

and worries in Japan. Panamax spot rates for the shipping of thermal coal fromNewcastle to Japan fell 20% wow, reflecting the continuing shutdown of severalcoal-fired power plants although some have restarted. Tohoku Electric declaredforce majeure last week, telling suppliers that it was unable to accept somepreviously contracted coal deliveries. Iron ore cargoes were also diverted toQingdao as the production of Japanese steel mills such as Nippon Steel, JFE Steeland Sumitomo Metal Industries remain constrained. Vale and Rio Tinto were alsoabsent from the spot chartering market last week.

Bunker costs add to the negatives. While spot capesize rates from WesternAustralia to Beilun dropped 12.7% last week to US$7.25/tonne, the time-charterequivalent (TCE) rate on the same route fell 45.6% to US$6,212/day. This probablyreflects the unstoppable upward march of bunker fuel, which has risen 28% YTD toUS$661/tonne and is eating into earnings net of bunker.

Supramax and handysize rates relatively immune. The continuing rise in therates of the smaller vessel classes reflects their greater diversity of cargoes.Although demand to ship Indian iron ore cargoes to China has been relatively quiet,rates are supported by grain cargoes from the Atlantic and Australia to Asia, and byIndian demand for Indonesian coal. In the medium term, Japanese reconstructionwill increase Japanese log demand.

Sector comparisons

Target Core 3-yr EPS P/BV ROE Div

Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%)

ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011Pacific Basin 2343 HK N 4.71 5.63 1,157 20.0 25.6 (21.2) 0.7 3.7 3.0

STX STX SP U 11.12 11.90 1,727 46.8 35.0 23.7 0.8 1.7 0.5

Precious Shipping PSL TB U 17.60 18.00 601 19.1 20.6 25.9 1.0 5.6 1.3TTA TTA TB N 18.50 23.70 423 nm 20.7 408.5 0.5 0.8 0.4

Maybulk MBC MK U 2.53 2.50 829 17.8 18.2 (10.4) 1.5 8.7 3.7Simp le average 26.1 24.0 86.4 0.9 4.1 1.8

O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy and TS = Trading SellSource: Company, CIMB Research


2/11

[ 2 ]

Freight rates

Figure 1: Dry bulk freight rate trends

Last week Qtr-to-date Yr-to-date

18-Mar-11 11-Mar-11 WoW (%) 1Q11 4Q10 3Q10 2Q10 2011 2010 2009Baltic Dry Index 1,531 1,562 -2.0% 1,352 2,326 2,358 3,311 1,352 2,756 2,602

Baltic Capesize Index 1,687 1,891 -10.8% 1,575 3,474 2,858 3,893 1,575 3,475 4,120

Baltic Panamax Index 2,094 2,132 -1.8% 1,799 2,243 2,701 3,827 1,799 3,113 2,396Baltic Supramax Index 1,574 1,529 +2.9% 1,351 1,647 1,894 2,643 1,351 2,148 1,655Baltic Handysize Index 755 730 +3.4% 721 879 1,035 1,373 721 1,125 790

Capesize average TCE (US$/day) 9,369 11,038 -15.1 7,938 33,267 26,301 37,827 7,938 32,875 39,065

Iron ore Tubarao-Beilun, 165k dwt 20,862 27,247 -23.4% 21,089 45,842 40,259 53,960 21,089 47,932 58,087Tubarao-Rotterdam, 165k dwt 6,013 5,645 +6.5% 2,534 32,165 24,449 38,181 2,534 32,667 43,909

Western Aust ralia-Beilun, 165k dwt 6,212 11,428 -45.6% 6,019 28,360 23,775 34,674 6,019 29,611 39,103Goa-Beilun, 145k dwt 8,845 12,657 -30.1% 9,210 25,483 21,080 32,623 9,210 28,070 29,524

Coal Queensland-Japan, 145k dwt 6,068 11,690 -48.1% 3,545 27,129 19,204 30,301 3,545 26,584 34,574

Panamax average TCE (US$/day) 16,821 17,115 -1.7 14,439 17,900 21,744 30,821 14,439 24,858 19,298Coal Newcastle-Japan, 70k dwt 11,276 19,666 -42.7% 11,875 16,325 21,087 29,068 11,875 23,686 16,553

Richards Bay-Rotterdam, 70k dwt 5,316 5,503 -3.4% 3,020 7,791 11,384 18,621 3,020 13,330 10,633

Supramax average TCE (US$/day) 16,458 15,985 +3.0 14,083 17,191 19,837 27,677 14,083 22,359 16,946

Handysize average TCE (US$/day) 11,311 10,909 +3.7 10,549 12,859 15,234 20,019 10,549 16,384 11,345

Capesize spot rates (US$/tonne)Iron ore Tubarao-Beilun, 165k dwt 19.00 21.50 -11.6% 18.49 25.86 23.10 28.23 18.49 26.19 28.10

Tubarao-Rotterdam, 165k dwt 9.40 9.45 -0.5% 8.25 13.82 11.58 14.77 8.25 13.66 15.10Western Australia-Beilun, 165k dwt 7.25 8.30 -12.7% 6.95 10.29 9.07 11.27 6.95 10.35 11.32

Goa-Beilun, 145k dwt 9.25 10.50 -11.9% 9.05 13.08 11.37 15.05 9.05 13.69 13.31Coal Queensland-Japan, 150k dwt 9.30 10.40 -10.6% 8.19 12.22 10.12 12.68 8.19 11.87 12.40

Panamax spot rates (US$/tonne)Coal Newcastle-Japan, 70k dwt 16.75 21.00 -20.2% 16.20 17.12 19.07 23.55 16.20 20.68 15.35

Richards Bay-Rotterdam, 70k dwt 15.60 16.00 -2.5% 13.83 14.82 16.12 20.74 13.83 17.72 14.40

Source: Bloomberg, Baltic Exchange, Clarkson Research Services, CIMB Research

Charts

Figure 2: Baltic Dry Indices

Baltic Dry, Capesize and Panamax Indices Baltic Supramax and Handysize Indices

0

2,000

4,000

6,000

8,000

10,000

J

09

FMAM J J A SONDJ

10

FMAM J J A SONDJ

11

FM

0

1000

2000

3000

4000

5000Baltic Capesize IndexBaltic Panamax IndexBaltic Dry Index (RHS)

0

500

1,0001,500

2,000

2,500

3,000

3,500

J

09

FMAMJ J AS ONDJ

10

FMAMJ J AS OND J

11

FM

0

250

500750

1,000

1,250

1,500

1,750

2,000Baltic Supramax Index (LHS)

Baltic Handysize Index (RHS)

Source: Bloomberg, CIMB Research


3/11

[ 3 ]

Figure 3: Average bulk t ime charter equivalent r ates (US$/day)

Baltic Capesize and Panamax TCE Baltic Supramax and Handysize TCE

0

20,000

40,000

60,000

80,000

100,000

J

09

FMAM J J A SO ND J

10

FMA MJ J A SO ND J

11

FM

Baltic Capesize TCE/day

Baltic Panamax TCE/day

0

5,000

10,00015,000

20,000

25,000

30,000

35,000

J

09

FMAM J J AS ON D J

10

F MA M J J A S ON D J

11

FM

Baltic Supramax TCE/day

Baltic Handysize TCE/day

Source: Baltic Exchange, CIMB Research

Figure 4: Baltic Dry Indices long-term view

0

5,000

10,000

15,000

20,000

J

03

FMAMJJASONDJ

04

FMAMJJASONDJ

05

FMAMJJASONDJ

06

FMAMJJASONDJ

07

FMAMJJASONDJ

08

FMAMJJASONDJ

09

FMAMJJASONDJ

10

FMAMJJASONDJ

11

FM

Baltic Capesize Index

Baltic Panamax Index

Baltic Supramax Index

Baltic Handysize Index


Figure 5: Chinas iron ore imports, port inventories, domestic production and import dependencyIron ore imports Feb: 48.6mmt (-1.5% yoy) Iron ore port inventories Mar 18: 83.1mmt (-0.0mmt wow)

0

10

20

30

40

50

60

70

80

J

05

A J O J

06

A J O J

07

A J O J

08

A J O J

09

A J O J

10

A J O J

11

-40%

-20%

0%

20%

40%

60%

80%

100%China iron ore imports (mmt)

Yoy (%)

50

55

60

65

70

75

80

85

90

Jul

08

A SOND J

09

FMAM J J ASO NDJ

10

FMA MJ J ASOND J

11

FM

China ports iron ore inventories (mmt)


4/11

[ 4 ]

Domestic production Feb: 72.4mmt (+17.8% yoy) Iron ore import dependency Jan: 89.8% (+2.2ppt mom)

0

20

40

60

80

100

120

J

05

A J O J

06

A J O J

07

A J O J

08

A J O J

09

A J O J

10

A J O J

11

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%Domestic iron ore production in China (mmt)Yoy (%)

30%

40%

50%

60%

70%

80%

J

04

A J O J

05

A J O J

06

A J O J

07

A J O J

08

A J O J

09

A J O J

10

A J O J


Figure 6: Crude steel production (mmt)

China Jan: 52.8mmt (+0.5% yoy) Global ex-China Jan: 66.6mmt (+9.3% yoy)

20

25

30

35

40

45

50

55

60

J

05

A J O J

06

A J O J

07

A J O J

08

A J O J

09

A J O J

10

A J O J

11

-20%

-10%

0%

10%

20%

30%

40%

50%China crude steel production (mmt)

Yoy (%)

30

40

50

60

70

80

J

05

A J O J

06

A J O J

07

A J O J

08

A J O J

09

A J O J

10

A J O J

11

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%40%

50%Global crude steel production - ex China (mmt)

Yoy (%)

Japan, Korea and Taiwan Jan: 17.0mmt (+13.8% yoy) Euro 5 Jan: 9.3mmt (+4.5% yoy)

8

9

10

11

12

13

14

15

16

17

18

J

05

A J O J

06

A J O J

07

A J O J

08

A J O J

09

A J O J

10

A J O J

11

-50%-40%-30%-20%-10%0%10%20%30%40%50%60%Crude steel production - JP+KR+TW(mmt)

Yoy (%)

4

5

6

7

8

9

10

11

12

13

J

05

A J O J

06

A J O J

07

A J O J

08

A J O J

09

A J O J

10

A J O J

11

-60%-50%-40%-30%-20%-10%0%10%20%30%40%50%60%70%80%Crude steel production - Euro 5 (mmt)

Yoy (%)


Note: Euro 5 countries are Germany, Italy, France, Spain and UK.


5/11

[ 5 ]

Figure 7: Shanghai weekly steel inventories (mmt)

Shanghai long product inventory Mar 11: 0.733mmt (-0.01mmtwow)

Shanghai hot rol led and cold rolled sheet inventory Mar 11:2.31mmt (+0.01mmt wow)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

J

06

ASONDJ

07

FMAMJJASONDJ

08

FMAMJJASONDJ

09

FMAMJJASONDJ

10

FMAMJJASONDJ

11

FM

-100%

-50%

0%

50%

100%

150%

200%Shanghai long product inventory (mmt)

Yoy (%)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

J

06

ASONDJ

07

FMAMJJASONDJ

08

FMAMJJASONDJ

09

FMAMJJASONDJ

10

FMAMJJASONDJ

11

FM

-100%

-50%

0%

50%

100%150%

200%

250%

300%

350%Shanghai HR/CR sheet inventory (mmt)Yoy (%)


Figure 8: Coal imports (mmt)

China Jan: 16.56mt (+3.0% yoy) Japan Jan: 15.6mmt (+4.9% yoy)

0

3

6

9

12

15

18

21

J

03

A JOJ

04

AJ OJ

05

A J OJ

06

A J OJ

07

A JOJ

08

A JOJ

09

A JOJ

10

A J OJ

11

-100%

0%

100%

200%

300%

400%

500%

600%China's coal imports (mmt)

Yoy (%)

10

12

14

16

18

20

J

03

A J OJ

04

A J OJ

05

AJ OJ

06

A J OJ

07

A J OJ

08

A JOJ

09

A J OJ

10

A JOJ

11

-40%

-20%

0%

20%

40%

60%Japan's coal imports (mmt)Yoy (%)


Figure 9: Chinese automobile and white goods production (units)

Auto producti on Feb: 1.294m (+5.5% yoy) White goods production Feb: 17.7m (+15.5% yoy)

0

250

500750

1,000

1,250

1,500

1,750

2,000

2,250

J

03

AJOJ

04

AJ OJ

05

AJOJ

06

A JOJ

07

AJOJ

08

AJOJ

09

AJOJ

10

A JOJ

11

-20%

0%

20%40%

60%

80%

100%

120%

140%

160%Automobile production (000)Yoy (%)

0

5,000

10,000

15,000

20,000

25,000

30,000

J

03

AJOJ

04

AJOJ

05

AJ OJ

06

A JOJ

07

AJOJ

08

AJOJ

09

AJ OJ

10

A JOJ

11

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%White goods production (000)Yoy (%)

Source: CEIC, CIMB Research


6/11

[ 6 ]

Figure 10: Property market indicators in China

Property sales Dec: 190.0m sq m (+16.2% yoy) Housing starts Dec: 147.5m sq m (+5.5% yoy)

0

50

100

150

200

J

03

A JOJ

04

AJ OJ

05

A JOJ

06

A J OJ

07

A JOJ

08

AJ OJ

09

A JOJ

10

A J O

-60%

-40%

-20%

0%20%

40%

60%

80%

100%

120%Property sales (sqm mil)Property sales yoy% (RHS)

0

20

40

60

80

100

120

140

160

J

03

AJ OJ

04

AJ OJ

05

A JOJ

06

A JOJ

07

A JOJ

08

A JOJ

09

AJ OJ

10

AJ O

-40%

-20%

0%

20%

40%

60%

80%

100%Housing Start (sqm mil)

Housing Start yoy% (RHS)

Floor space under construction Feb: 3.92bn sq m (+33.9% yoy) Real estate investment Feb ytd: Rmb425bn (+35.2% yoy)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

J

04

A JO J

05

A J OJ

06

A J OJ

07

A JOJ

08

A JOJ

09

A J OJ

10

A JOJ

11

0%

10%

20%

30%

40%

50%Floor space under construction - ytd (m sq m)Yoy (%)

0

1,000

2,000

3,000

4,000

5,000

6,000

J

04

A JOJ

05

A J OJ

06

A J OJ

07

A JOJ

08

A JOJ

09

A J OJ

10

A JOJ

11

0%

10%

20%

30%

40%

50%

60%

70%Real estate investment - ytd (Rmb bn)

Yoy (%)

Land area developed Dec: 212.5m sq m (-7.6% yoy) Real estate clim ate index Feb: 102.9

0

50

100

150

200

250

300

J

04

A J OJ

05

A J OJ

06

A J OJ

07

A J OJ

08

A J O J

09

A J OJ

10

A J O

-60%

-40%

-20%

0%

20%

40%

60%

80%Land area developed - ytd (m sq m)

Yoy (%)

90

92

94

96

98

100

102

104106

108

J

04

A J OJ

05

A J OJ

06

A J OJ

07

A J OJ

08

A J OJ

09

A J OJ

10

A J OJ

11

-3%

-2%

-1%

0%

1%

2%

3%Real estate climate index Mom (%)

Source: soufun, CEIC, CIMB Research

Figure 11: Bulk commodity prices

Last week Qtr-to-date Yr-to-date

18-Mar-11 11-Mar-11 WoW (%) 1Q11 4Q10 3Q10 2Q10 2011 2010 2009

China: Iron ore spot cfr imports (US$/ton) 170.50 175.50 -2.8% 185.68 164.50 143.77 165.58 185.68 151.92 84.65

China: Domestic iron ore (US$/ton) 196.59 196.79 -0.1% 193.68 176.59 150.96 168.78 193.68 154.95 91.39

China: Australia iron ore ctt (US$/ton) 148.19 149.24 -0.7% 147.89 140.79 159.07 134.46 147.89 126.67 80.48

China: Brazil iron ore ctt (US$/ton) 163.83 166.33 -1.5% 163.32 159.96 172.10 142.64 163.32 140.63 94.23

China: Rebar (Rmb/ton) 4,713 4,628 +1.8% 4,764 4,433 4,092 4,267 4,764 4,167 3,671

China: HRC (Rmb/ton) 4,736 4,630 +2.3% 4,775 4,382 4,192 4,425 4,775 4,241 3,724

China: CRC (Rmb/ton) 5,635 5,625 +0.2% 5,650 5,391 5,301 5,947 5,650 5,600 4,768

China: Wire rod (Rmb/ton) 4,688 4,630 +1.3% 4,779 4,538 4,207 4,297 4,779 4,244 3,647

Qinhuangdao 6800 kc coal FOB (US$/ton) 137.95 137.95 +0.0% 137.57 123.03 113.06 110.94 137.57 115.09 92.25

Newcastle 6700 kc coal CFR (US$/ton) 140.15 141.25 -0.8% 137.42 119.59 104.15 112.09 137.42 110.70 84.16

Source: Bloomberg, Metal Bulletin, Antaike, CIMB Research


7/11

[ 7 ]

Figure 12: Iron ore impor t prices (cfr China) and China domestic i ron or e prices (US$/MT)

40

60

80

100

120

140

160

180

200

220

J

05

JA SON DJ

06

FMAM J J ASONDJ

07

FMAM J J ASONDJ

08

FMAMJ J AS OND J

09

FMAMJ J AS OND J

10

FMAMJ JASOND J

11

FM

India imports 63.5% spot cfr (US$/MT)

China domestic 66% incl. 17% VAT

Australia imports 63.5% contract + freight

Brazil imports 67% contract + freight

Source: Bloomberg, Antaike, CIMB Research

Figure 13: China domesti c steel pr ices (Rmb/MT)

2,000

3,000

4,000

5,000

6,000

7,000

8,000

J

06

FMAMJJASONDJ

07

FMAMJ JASONDJ

08

FMAMJJASONDJ

09

FMAMJ JASONDJ

10

FMAMJ JASONDJ

11

China domestic rebar (Rmb/MT)

China domestic HR sheet

China domestic CR sheet

China domestic high-speed wire rod

Source: Bloomberg, Antaike, CIMB Research

Figure 14: China Qinhuangdao coal p rice and Newcastle coal pri ce cfr China (US$/MT)

0

25

50

75

100

125

150

175

200

J

07

FM AMJ J A SON D J

08

F MAM J JA S OND J

09

FMAM J J AS OND J

10

FMA MJ J A SO ND J

11

Qinhuangdao 6800 kc coal spot FOB price (US$/MT)

Newcastle 6700 kc steam coal spot CFR price (US$/MT)

Source: Bloomberg, The McCloskey Group, CIMB Research


8/11

[ 8 ]

Valuation and recommendation

Maintain UNDERWEIGHT. Dry bulk sector demand and supply fundamentals lookweak over the next three years due to excessive newbuilding deliveries and thenegative impact of exogenous events like bad weather on commodity supply. Weexpect the overall bulk fleet to expand 15% in dwt terms this year and 12% in 2012,which is significantly higher than the demand growth of 4-6%. We maintain ourforecast of a 37% drop in BDI to 1,729 points in 2011, followed by a 17% decline to

1,441 points in 2012 and a 4% dip to 1,388 points in 2013. As dry bulk freight ratesare not expected to stabilise until 2013, we believe investors will give the sector amiss for the next two years. As usual, freight rates are likely to remain volatile in 2011.This may provide the opportunity for some trading but risk-averse investors shouldavoid the sector. We have two Neutral calls, i.e. Pacific Basin (TP: HK$5.63) and TTA(TP: THB23.70) on valuation grounds, and Underperforms on STXPO (TP: S$11.90),Precious Shipping (THB18.00), and Maybulk (TP: RM2.50). We continue to prefer thecontainer sector for exposure to shipping.

Figure 15: Sector comparisons

3-yr EPS P/BV ROE Div

Bloomberg Target Mkt c ap Core P/E (x ) CAGR (x) (%) yield (%)t icker Recom. Pric e Pric e (US$ m) CY2011 CY201 2 (%) CY20 11 CY2 011 C Y2011

Dry bulk groupSTX Pan Ocean STX SP U S$10.68 S$11.90 1,727 46.8 35.0 179.7 0.8 1.7 0.5

Pacific Basin 2343 HK N HK$4.67 HK$5.63 1,157 20.0 25.6 (21.2) 0.7 3.7 3.0Thoresen Thai TTA TB N THB18.10 THB23.70 423 (120.9) 20.7 (10.2) 0.5 0.8 0.4

Precious Shipping PSL TB U THB17.50 THB18.00 601 19.1 20.6 (24.5) 1.0 5.6 1.3Malaysian Bulk MBC MK U RM2.53 RM2.50 829 17.8 18.2 (6.9) 1.5 8.7 3.7

China COSCO 1919 HK NR HK$7.76 - 14,286 11.2 9.3 (16.6) 1.3 10.6 2.0China Shipping Devt 1138 HK NR HK$8.45 - 4,572 11.0 8.9 41.4 1.0 9.7 2.4

Sinotrans Shipping 368 HK NR HK$2.54 - 1,300 11.6 9.9 - 0.6 5.6 4.0Sincere Navigation 2605 T NR TWD32.20 - 618 8.1 9.4 - 1.2 14.5 6.8

U-Ming Marine 2606 T NR TWD60.80 - 1,763 14.4 16.1 - 1.7 12.1 4.2Simple average . 7. 7.7 . 7 . .

O = Outperform, N = Neutral, U = Underperform, NR = Not Rated, TB = Trading Buy and TS = Trading SellSource: Company, CIMB/CIMB-GK estimates, Bloomberg


9/11

[ 9 ]

DISCLAIMER

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or otherjurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

By accepting this report, the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions set forth below andagrees to be bound by the limitations contained herein (including the Restrictions on Distributions set out below). Any failure to comply with these limitations mayconstitute a violation of law. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this report may be (i) copied,photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part,for any purpose without the prior written consent of CIMB.

CIMB, its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies)covered in this research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities.Further, CIMB, its affiliates and its related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act asmarket maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis andmay also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit suchinvestment, advisory or other services from any entity mentioned in this report. The views expressed in this report accurately reflect the personal views of the analyst(s)about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specificrecommendations(s) or view(s) in this report. CIMB prohibits the analyst(s) who prepared this research report from receiving any compensation, incentive or bonusbased on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. However, the analyst(s) may receivecompensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations and theresearch personnel involved in the preparation of this report may also participate in the solicitation of the businesses as described above. In reviewing this researchreport, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is,subject to the duties of confidentiality, available on request.

The term CIMB shall denote where applicable the relevant entity distributing the report in that particular jurisdiction where mentioned specifically below shall be a CIMBGroup Sdn Bhds affiliates, subsidiaries and related companies.

(i) As of 21 March 2011, CIMB has a proprietary position in the following securities in this report:

(a) -(ii) As of 22 March 2011, the analyst, Raymond Yap and John Tang who prepared this report, has / have an interest in the securities in the following company or

companies covered or recommended in this report:

(a) -.

The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. This report does not purportto contain all the information that a prospective investor may require. CIMB or any of its affiliates does not make any guarantee, representation or warranty, express orimplied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report and accordingly, neither CIMBnor any of its affiliates nor its related persons shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect orconsequential losses, loss of profits and damages) of any reliance thereon or usage thereof.

This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB and its affiliates clients generally anddoes not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Theinformation and opinions in this report are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities,related investments or other financial instruments thereof.

Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives,financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before

participating in any transaction in respect of the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible forsale in all jurisdictions or to all categories of investors.

Austral ia: Despite anything in this report to the contrary, this research is provided in Australia by CIMB Research Pte. Ltd. (CIMBR) and CIMBR notifies each recipientand each recipient acknowledges that CIMBR is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cwlth) inrespect of financial services provided to the recipient. CIMBR is regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ fromAustralian laws. This research is only available in Australia to persons who are wholesale clients (within the meaning of the Corporations Act 2001 (Cwlth)) and issupplied solely for the use of such wholesale clients and shall not be distributed or passed on to any other person. This research has been prepared without taking intoaccount the objectives, financial situation or needs of the individual recipient.

France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, orused in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation forthe purchase of any financial instrument.

Hong Kong: This report is issued and distributed in Hong Kong by CIMB Securities (HK) Limited (CHK) which is licensed in Hong Kong by the Securities and FuturesCommission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase orotherwise deal in the securities covered in this report should contact the Head of Sales at CIMB Securities (HK) Limited. The views and opinions in this research reportare our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial ServicesAuthority apply to a recipient, our obligations owed to such recipient therein are unaffected. CHK has no obligation to update its opinion or the information in thisresearch report.This publication is strictly confidential and is for private circulation only to clients of CHK. This publication is being supplied to you strictly on the basis that it will remainconfidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directlyor indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CHK. Unless permitted to do so by the securities laws of HongKong, no person may issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relatingto the securities covered in this report, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted todo so under the securities laws of Hong Kong).

Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (CIMBI). The views and opinions in this research report are our own as of the datehereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient,our obligations owed to such recipient therein are unaffected. CIMBI has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CIMBI. This publication is being supplied to you strictly on the basis that it will remainconfidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directlyor indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBI. Neither this report nor any copy hereof may be distributedin Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesia residents except in compliance with applicable Indonesian capital market lawsand regulations.

Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (CIMB). The views and opinions in this research report are our own as of the datehereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient,our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the basis that it will remainconfidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directlyor indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB.


10/11

[ 10 ]

New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for thepurposes of their business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978.

Singapore: This report is issued and distributed by CIMB Research Pte Ltd (CIMBR). Recipients of this report are to contact CIMBR in Singapore in respect of anymatters arising from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If theFinancial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipienttherein are unaffected. CIMBR has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutionalinvestor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publicationis being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced inany form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent ofCIMBR.

As of21 March 2011CIMB Research Pte Ltd does not have a proprietary position in the recommended securities in this report.

Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is notan offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public inSweden.

Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will notbe registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or soldwithin the Republic of China through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Law of theRepublic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China.

Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (CIMBS). The views and opinions in this research report are our own asof the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to arecipient, our obligations owed to such recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report.

This publication is strictly confidential and is for private circulation only to clients of CIMBS. This publication is being supplied to you strictly on the basis that it will remainconfidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directlyor indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBS.

United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities orgovernmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAECentral Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to alimited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any otherpurpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of anyother contract of whatsoever nature within the territory of the United Arab Emirates.

United Kingdom: This report is being distributed by CIMB Securities (UK) Limited only to, and is directed at selected persons on the basis that those persons are (a)persons falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the Order) who have professional experience ininvestments of this type or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(1) of the Order, (allsuch persons together being referred to as relevant persons). A high net worth entity includes a body corporate which has (or is a member of a group which has) acalled-up share capital or net assets of not less than (a) if it has (or is a subsidiary of an undertaking which has) more than 20 members, 500,000, (b) otherwise, 5million, the trustee of a high value trust or an unincorporated association or partnership with assets of no less than 5 million. Directors, officers and employees of suchentities are also included provided their responsibilities regarding those entities involve engaging in investment activity. Persons who do not have professionalexperience relating to investments should not rely on this document.

United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related companyof CIMB Research Pte Ltd solely to persons who qualify as "Major U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934.

This communication is only for Institutional Investors and investment professionals whose ordinary business activities involve investing in shares, bonds and associatedsecurities and/or derivative securities and who have professional experience in such investments. Any person who is not an Institutional Investor must not rely on thiscommunication. However, the delivery of this research report to any person in the United States of America shall not be deemed a recommendation to effect anytransactions in the securities discussed herein or an endorsement of any opinion expressed herein. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc.

Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional orsophisticated investors as defined in the laws and regulations of such jurisdictions.

RECOMMENDATION FRAMEWORK #1**

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS

OUTPERFORM: The stock's total return is expected to exceed a relevantbenchmark's total return by 5% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, isexpected to outperform the relevant primary market index over the next 12

months.

NEUTRAL: The stock's total return is expected to be within +/-5% of a relevantbenchmark's total return.

NEUTRAL: The industry, as defined by the analyst's coverage universe, isexpected to perform in line with the relevant primary market index over the next12 months.

UNDERPERFORM: The stock's total return is expected to be below a relevantbenchmark's total return by 5% or more over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe,is expected to underperform the relevant primary market index over the next 12months.

TRADING BUY: The stock's total return is expected to exceed a relevantbenchmark's total return by 5% or more over the next 3 months.

TRADING BUY: The industry, as defined by the analyst's coverage universe, isexpected to outperform the relevant primary market index over the next 3months.

TRADING SELL: The stock's total return is expected to be below a relevantbenchmark's total return by 5% or more over the next 3 months.

TRADING SELL: The industry, as defined by the analyst's coverage universe,is expected to underperform the relevant primary market index over the next 3months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa M alaysia, Stock Exchange of Thailand and Jakarta Stock Exchange. Occasionally, it is permitted for the total expected returns to betemporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

CIMB Research Pte Ltd (Co. Reg. No. 198701620M)


11/11

[ 11 ]

RECOMMENDATION FRAMEWORK #2**

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS

OUTPERFORM: Expected positive total returns of 15% or more over the next12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe,has a high number of stocks that are expected to have total returns of +15% orbetter over the next 12 months.

NEUTRAL: Expected total returns of between -15% and +15% over the next

12 months.

NEUTRAL: The industry, as defined by the analyst's coverage universe, has

either (i) an equal number of stocks that are expected to have total returns of+15% (or better) or -15% (or worse), or (ii) stocks that are predominantlyexpected to have total returns that will range from +15% to -15%; both over thenext 12 months.

UNDERPERFORM: Expected negative total returns of 15% or more over thenext 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe,has a high number of stocks that are expected to have total returns of -15% orworse over the next 12 months.

TRADING BUY: Expected positive total returns of 15% or more over the next 3months.

TRADING BUY: The industry, as defined by the analyst's coverage universe,has a high number of stocks that are expected to have total returns of +15% orbetter over the next 3 months.

TRADING SELL: Expected negative total returns of 15% or more over the next3 months.

TRADING SELL: The industry, as defined by the analyst's coverage universe,has a high number of stocks that are expected to have total returns of -15% orworse over the next 3 months.

** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China l istings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the

prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

drybulkshipping-110322

Documents