$SAMUDERA SHIPPING LINE LTD(S56.SI)$ A rising tide lifts all ships, including shipping company Samudera, which SAC Capital is optimistic on.

SAC Capital analyst Lim Shu Rong is optimistic about Samudera Shipping Line as it rides on a “bumper year” for shipping lines.

In an unrated report dated March 15, Lim notes freight rates are still “buoyant and favourable” to shipping companies as the capacity imbalance persists, adding that the China containerized freight index was up 76% y-o-y as at March 11.

With that, the company has chartered in an additional six newly built vessels, of which two have already been deployed and the rest will be delivered in 4QFY2022 ended December.

Furthermore, long term charter contracts have already been secured for these vessels, bringing the total number of chartered-in vessels to 24, which is about 71% of the total fleet size.

Most of the vessels are chartered in for 18 months, and Lim says that although charter hire rates trends in line with freight rates, longer-term charters has helped Samudera to preserve some margin as it is able to lock in lower rates as compared to the spot rate.

However, Lim is less upbeat on Samudera’s operating margin, which is expected to come under pressure, due to the Russia-Ukraine conflict.

This has raised bunker costs and caused delays at ports, which are expected to raise operating costs due to extended transit time, writes the analyst.

Port congestion also reduces the number of vessel calls, as Samudera earns from more vessel trips due to most of its chartered-in vessels being on time charter.

A time charter refers to a time-bound agreement, where a vessel is leased out to a charterer for a fixed period of time.

During the FY2021, Samudera Shipping Line posted a record year, with both revenue and net profit at their highest for the past five years.