By Daniel Stewart & Co
- Shares in Clarkson fell by 3.4% on Friday. A possible reason for this was that the ICAP profit warning mentioned a weaker than expected performance from its newer businesses. In particular, it said, “In shipping, the Baltic dry and wet indexes are 48% and 65% lower respectively than in the corresponding period of last year, and activity levels are severely reduced, which has affected performance.”
- We are not concerned about current market levels for Clarkson. While the Baltic Dry Index has retreated sharply from its November 2009 peak (down from 4,600 to 2,715) it is exactly in line with its average level for 2009. Meanwhile, the tanker market has recovered strongly from its average levels for 2009, to the point where it could be the source of upgrades for some brokers.
- The recent weakness of sterling against the US dollar has reached the point at which we are starting to see sterling weakness/dollar strength as a benefit for the shipbrokers. The average $/£ rate for 2009 was 1.582. If the current rate of $1.556/£ continues then, according to the sensitivity analysis in its 2008 accounts, currency could add about £0.5m or 2% to 2010 forecasts.
- We reiterate our Buy with a target price of 982p – upside of 24%
