Soechi Lines Eying Opportunities in Indonesia's Maritime Sector
As Indonesian President Joko Widodo is eager to turn Indonesia into a global maritime force by developing an international hub for sea trade, shipping company Soechi Lines is in a good position to take advantage of this push. Moreover, ever-growing oil consumption in Indonesia causes increasing demand for ship chartering. Soechi Lines has a fleet consisting of 37 ships (including oil tankers, chemical tankers and gas carriers) with a cargo capacity of 1.48 million tons and controlling a market share of 16 percent.
The company's shipyard in Karimun (located in the Strait of Malacca) is the widest in Indonesia stretching across 216 hectares.
Several matters are expected to have a positive impact on the performance of Soechi Lines: (1) President Widodo's push for the sea toll road, a maritime program initiated in a bid to enhance domestic connectivity (hence reducing the country’s logistics costs), (2) government incentives for shipyard/shipbuilding companies, and (3) the government's plan to purchase ships in large quantities.
Previously, the nation's shipyard industry already thrived after the Indonesian government implemented the cabotage principle to support the domestic maritime industry. Due to this law the number of Indonesian-flagged ships rose from 6,000 in 2005 to 14,000 at the end of 2014, while carrying capacity surged from 5.6 million tons to 16 million tons. Currently, nearly all domestic cargo in Indonesia is transported by Indonesian ships, whereas a decade ago this figure stood at 50 percent.
Another positive factor is that demand for new ships is high in Indonesia as cargo capacity needs to be expanded. Many existing ships were built over 25 years ago. Moreover, the government issued a regulation stipulating that all state-owned ships (financed through the state budget) have to be built (and repaired) in domestic shipyards (it is questioned, however, whether domestic shipyards have the quality to compete with global counterparts). Up to October 2015, shipyards received orders worth IDR 17.7 trillion (approx. USD $1.3 billion) for new ships or maintenance. These orders came from the Indonesian Transportation Ministry (IDR 11.8 trillion), the Indonesian Fishery and Maritime Ministry (IDR 4.7 trillion), and the Ministry of Defense of the Philippines (IDR 1.2 trillion).
Moreover, it has been reported that the Indonesian government targets to invest IDR 20 trillion (approx. USD $1.5 billion) each year for ship construction. This would also mean that ship maintenance and repairing will become an increasingly profitable business segment.
Financial Highlights Soechi Lines:
| 2013 | 2014 | 2015F | 2016F | 2017F | |
| Revenues |
106.4 | 127.5 | 139.1 | 176.4 | 177.0 |
| Net Income | 30.2 | 33.2 | 38.8 | 43.8 | 47.9 |
| EBITDA | 41.8 | 57.3 | 65.9 | 78.2 | 82.4 |
| P/E Ratio (x) | 10.40 | 6.16 | 5.23 | 4.46 | 4.24 |
| P/BV (x) | 1.47 | 0.86 | 0.71 | 0.61 | 0.54 |
in million US dollar unless otherwise stated
¹ in US dollar
Source: CIMB Securities
Stock Quote Soechi Lines - SOCI: