ACM Shipping

Despite declining freight rates, ACM, one of the most profitable firms in the wet tanker broking business, has sailed in with better-than-expected interim results.

ACM felt the positive benefits of US$ strengthening in the half to September. Sales reduced by only 1% in sterling terms to £12.5m, despite a 19% dollar decline to $19.8m, reflecting the effects of falling freight rates on the spot desk. Encouragingly, cash generative ACM maintained profits (before tax and amortisation) at a healthy £3.3m (2008: £3.4m), finished the half with £6.4m cash and no debt and upped the dividend 10% to 2.75p.

Though spot desk revenues were down, ACM is strongly positioned to benefit when rates recover, having increased its market share. Furthermore, its other divisions (time charter, sale and purchase) grew during the half and ACM reported a strong turn from its joint venture with GFI Group, which conducts derivatives brokerage, with its first half profits contribution increased 28% to £823,000.

Given its cash, ACM is well placed to continue expanding geographically – new offices were opened in Moscow and Beijing in the half, adding to existing operations in Singapore, Mumbai and Shanghai – whilst investing in the diversification of its broking business into new areas such as dry bulk cargo.

Furthermore, with its wet tanker focus, the company represents an astute way to play global recovery. Demand for oil has remained strong, particularly from the Far East, and any economic recovery will result in far firmer freight rates.

Full year forecasts suggest a pre-tax profit decline from £8.9m to £6.5m, ahead of £6.8m for 2011. Based on estimated earnings of 26.6p and a likely 9.3p dividend, the shares, backed by Growth Company Investor at 187.5p in July, trade on a paltry p/e of 7.7 and offer a bumper yield of 4.5%. They should navigate north over the medium-to-long haul.