’This article first appeared in The Edge Financial Daily, on February 3, 2016.

KUALA LUMPUR: Malaysian Bulk Carriers Bhd’s (Maybulk) profit warning has sent its share price to an all-time low of 61 sen yesterday before it closed at 61.5 sen.

“This does not come as a surprise to us as the Singapore-listed associate (PACC Offshore Services Holdings Ltd [POSH]) has lost 74% of its market capitalisation since listing at S$1.15 in April 2014 to the last closing price of S$0.30 (89 sen)  last Friday,” MIDF Research wrote in its research report yesterday.

POSH’s share price closed at 29 cent yesterday.

The closing price is substantially below the shipping group’s net asset per share of RM2.295 as at Sept 30, 2015. Maybulk’s share price has more than halved from the high of RM1.40 in mid-January last year.

According to MIDF, the profit warning stems from potential provisions for onerous contracts for its’ in-charted vessels, due to the higher costs of meeting the obligations under the contracts compared to the economic benefits.

“As Maybulk is unable to charter out these vessels at a higher rate compared to its cost of in-chartering, it is making provisions equivalent to the estimated losses arising from seeing out the remainder of these contracts,” MIDF commented.

MIDF analyst Tay Yow Ken said the decline in share price is most likely due to the news on the substantial loss that was released.

“We are placing Maybulk under review for [a] potential downgrade premised on the uncertainty surrounding the size of the write-down of its associate’s carrying value, which will impact our sum-of-parts (SOP) valuation,” he said. MIDF has a “neutral” call on Maybulk with a target price of 77 sen based on SOP valuation.

Maybulk’s statement last Friday said that the management expects to record a “substantial loss” for the fourth quarter and full year ended Dec 31, 2015 (FY15) due to unfavourable market conditions.

The loss for FY15 will be the shipping group’s maiden loss since it was listed on Bursa Malaysia in 2003.