KUALA LUMPUR: BIMB Securities Research has initiated a "Buy" recommendation on MTT Shipping and Logistics Bhd with a target price of RM1.90, implying a 58 per cent upside from its last price of RM1.20.
The firm underpinned this by citing stronger earnings prospects, rising charter rates and tight supply in the small and mid-sized container shipping market.
BIMB Securities said two upcoming charter rollovers involving MTT Samalaju and MTT Sainusee already indicated rates 19 per cent higher than their previous charters.
"This reflects the increasingly tight supply in the sub-4,000 twenty-foot equivalent unit segment.
"This also bodes well for the additional four incoming container vessels in financial year 2027 (FY27), and we have upgraded our charter expectations accordingly," it said in a report.
BIMB Securities said MTT Shipping's gross margins for the charter segment rose to 61.6 per cent in the first half of FY26, up from 57.8 per cent in FY25.
Assuming gross margins remain below 60 per cent, the firm expects MTT Shipping's net profit to surpass RM400 million by FY27, implying 33 per cent growth in FY26 and nine per cent in FY27.
It also expects the staggered delivery of the new vessels to support earnings growth over the next three years, with net profit projected to record a compound annual growth rate of 21 per cent between FY25 and FY28.
BIMB Securities said MTT Shipping's earnings were likely to be less volatile than those of typical shipping companies, supported by its domestic liner business and charter operations.
The domestic liner business benefits from stable and growing volumes, underpinned by MTT Shipping's 46 per cent market share in the domestic segment and protection under the cabotage policy.
Meanwhile, the company's charter operations provide higher margins of about 60 per cent, compared with 27 per cent for liner operations.
BIMB Securities acknowledged that its target price implied a relatively high valuation of 12 times FY27 earnings, compared with the sector's direct peers trading at 5.6 times trailing 12-month earnings.
"We think this is easily justified by MTT Shipping's superior growth outlook and higher profitability, with return on equity projected at 18 per cent in FY27, against 10 to 11 per cent for peers," it said.
It added that the company's improving engagement with institutional investors could also enhance its market visibility and attract greater investor interest in the shipping sector.
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