IPO of CBL International Ltd: Marine Fuel Bunkering Facilitator for Container Ships in Asia-Pacific

Maritime transport is the most used mode of transport for international trade. Ocean freight shipping has long been the most cost-effective mode of transporting goods in terms of logistics costs because it offers the best price and time combinations.  Many related industries are forming around the maritime logistics business, from shipbuilding to refuelling. This business segment is growing particularly strongly in the Asia-Pacific region following the relocation of much of the manufacturing capacity from Europe and North America.

Today, we will talk about one of the representatives of this sector. CBL International Ltd. is planning an IPO on the NASDAQ exchange on 16 December 2022. Its stocks will be traded under the ticker BANL.

Brief information on CBL International

CBL International Ltd. was incorporated in 2015 in the Cayman Islands. This is a common jurisdiction for companies that operate in the Asia-Pacific region, particularly in China. The issuer provides refuelling services for merchant ships, whose main customers are container shipping operators. The advantage of working with container carriers is that their vessels sail on specific routes according to timetables. This greatly simplifies the logistics of fuel delivery and reduces the cost of these services.

The business of CBL International

According to Frost & Sullivan Limited, half of the top 10 container shipping operators (over 85% of the world's container fleet) have been regular customers of CBL International for the past 8 quarters. On 30 June 2022, they accounted for 77% of the issuer's revenue. The company is keen to increase its share in the Asia-Pacific market. Going forward, CBL International intends to increase the pace of its global expansion.

The business of CBL International

According to a Frost & Sullivan report, the issuer's share of the bunkering market in Singapore is 36%, in China, it is 12%; and 5% in APAC as a whole region. At the same time, the company has the second-largest volume of fuel shipped in the PRC and Singapore markets. The COVID-19 pandemic has benefited CBL International's business, as disruptions in global supply chains have led to increased demand for the services of container carriers, which are the company's main customers. The issuer operates in thirty-six key ports in the Asia-Pacific region.

The business of CBL International

On 30 June 2022, the amount of investment received by CBL International was as high as USD 490,000. The main investors were CBL Asia Limited and Straits Energy Resources Berhad.

Prospects for the CBL International addressable market

According to Allied Market Research, the global bunker fuel market was valued at USD 109.6 billion in 2020. By 2030, the estimate is expected to increase to USD 164.9 billion. The projected compound annual growth rate (CAGR) from 2021 to 2030 is 4.3%. In 2021 the Asia-Pacific region accounted for 47% of the global bunker fuel market. This is due to its significant share in global seaborne trade, and high business activity.

The main drivers for the growth of this market are the demand for liquefied gas as an alternative to fuel oil. It is worth noting that initiatives to reduce fuel consumption will hamper the growth of the industry, as it faces increasing government regulation aimed at reducing pollution.

CBL International's addressable market

Main competitors:

Tianjin Port Development Holdings LimitedChevron CorporationExxon Mobil CorporationTotalEnergies SEBP p.l.c.Shell plc

CBL International’s financial performance

For the first half of 2022, CBL International's net profit was USD 1.09 million, down 24.48% year-on-year. At the end of 2021, the indicator reached the level of 3.57 million USD, and relative growth compared to the statistics of 2020 was 24.02%. In the last 12 months, net profit reached USD 3.22 million.

CBL International's financial performance

The company's revenue for the first quarter of this year increased by 47.88% to 235.7 million USD, and for the full year 2021 by 39.39% to 326.54 million USD. In the last twelve months, sales amounted to USD 402.85 million.

CBL International's financial performance

On 30 June 2021, the company had USD 4.51 million in its accounts, with total liabilities of USD 23.95 million.

Strengths and weaknesses of CBL International

Strengths:

Promising addressable marketHigh revenue growth rateRegular customer baseFlexible payment system for servicesLeadership positions in the Chinese and Singaporean marketsSignificant investments in expansion into other markets

Weaknesses:

High competitionDependence on Chinese regulators, as foreign investors participate in the company's capitalHigh dependence on 5 key clientsNo plans to pay dividends to shareholders

What we know about the CBL International IPO

The underwriter of the CBL International Ltd. IPO is Pacific Century Securities, LLC. The issuer intends to sell 3.75 million common stocks. The gross proceeds from the sale of stocks may amount to 14 million USD, excluding the sale of ordinary options by the underwriter. If the offering is successful, the capitalisation of CBL International Ltd. will amount to USD 120 million.

We use a P/S (capitalisation/revenues) ratio to value this company. The issuer's P/S value is 0.30. Under current market conditions, the P/S multiple in the fuel resupply services sector during the lock-up period could be as high as 0.52. In this case, the upside of the issuer's stocks could reach 73% ((3/2.17-1)*100%).

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