Gulf Navigation Holding’s 75 per cent year-to-date returns are the highest on the DFM index among its peers. The Dubai company operates in the integrated shipping and maritime industry, with a fleet that caters to various operations, including chemical and livestock transportation.
A substantial 92 per cent of its revenue come from vessel-owning and chartering services. Gulf Navigation’s prospects are in an upward trajectory owing to a wave of positives coming its way. The company had reported gross revenues of Dh137 million in 2022, a growth of 15 per cent.
Reworking its costs
This was primarily driven by the charter hire and other agency services. There are also plans to buy petrochemical tankers while seeking to increase its fleet by 50 per cent over the next two years. The current fleet numbers 11 tankers and chartered ships transporting chemical, livestock as well crew and passengers.
For shareholders, one major positive was its overall reduction in its costs by 18 per cent. Over the past one year, Gulf Navigation undertook several measures for the same. Among the major ones, there was the refinancing of its five petrochemical tankers at $62 million, at interest below 4 per cent.
This allows the company to lower its total cost of borrowing. It had also agreed with existing sukuk holders and trade creditors to convert more than Dh85 million worth of debts into shares. Other moves included cancelling 637.70 million shares (equating to 50 per cent of the equity) to absorb the previous accumulated loss by the same amount.
Tethered to growth in chemical shipments
At the macro level, the global chemical market tanker market is valued at $15 billion to $ 8 billion, with expectations of a peak CAGR of 7.5 per cent over the next 10 years. Organic chemicals lead the bulk of the market share, with 60 per cent and a CAGR of 8 per cent in the next decade.
The organic chemical market demand is said to be inelastic as it is used in daily needs, including medicines, personalcare products, cosmetics, and food and beverages. The increasing need for secure transportation of specialty and expensive chemical products could increase the overall profile of such shipping firms.
This sector is expected to enjoy one significant tailwind in the form of large-scale chemical industry production and its associated distribution.