Sure thing, and yes, that data point on containers is a fine illustration. |
Agreed hpcg, the prime reason for my post was to emphasise the increasing journey lengths and difficulties at the canals, and thus the general point that rates are rising across the board. |
rivaldo - containers are not significant to Braemar, it is the tankers and dry bulk. The canals impact everything really. |
Per FT Alphaville the cost of container shipping worldwide is up more than 60 per cent this week, and sailing around Africa is adding 10 days to containerships’ journeys. All this has to be good news for BMS?
And as regards the possible closure of the Suez/Panama Canals:
"A closure of these key thoroughfares would boost container demand by 1.5% and 7% respectively. For tankers and bulkers, the closure of the Suez Canal would add roughly 30% to transit distances and boost fleet demand between 1-2%, according to their estimates. Longer supply lines tie up more vessels, boost freight rates, widen origin-destination spreads, and lift bunker demand. Furthermore, a worsening supply chain may be bullish goods demand as companies over-order to ensure adequate inventories. " |
Absurd spread at the moment. Price has under-reacted even at Clarkson IMO. I have added spread bets in both. I have some substantial dividends turning up this month and they will certainly be directed here unless the price makes substantial progress. I imagine there is supply from the one or more of the institutions most upset about the pay policy. Lightship has probably taken a chunk out of that, already, which might give selling institutions pause for thought. |
Good Clarkson results, but fully expected given their H1 compared to H2 seasonality in the past. I would be a little wary that BMS are not going to beat in my book because of where the expectations are. They did £6.7m underlying EBIT in the first half and consensus is at £17.5m for the full year, which looks high if anything.
This is partly because Cavendish are too high at £18m and Edison may be closer to the mark at £16.7m
But I don't think everyone should expect a beat this year because otherwise they'll end up disappointed.
Eric |
Nice update indeed from Clarkson, fingers xd BMS have experienced the same! DYOR |
Certainly all bodes well for a strong FY25 (which begins Mar'24) I am sharpening my pencil, currently I only have 45p eps for FY25.... |
rimau1 - that could possibly correlate with Lightships recent share purchases since, as another ship broking outfit, they will have great insight into current market trends. |
Clarkson have this morning announced trading ahead of expectations with strong performance especially in broking. Strong read across here where i am surprised we have not moved higher with the recent small cap Santa rally. |
Very strong finish. I guess there is a buyer that figures they may as well get this distribution as they are prepared to pay this when it is ex-rights. |
Riv - interesting timing by Lightship who don't appear to have been a shareholder prior to that investment. Their shareholding was accrued over a number of trading days since no daily volume has exceeded 300,000 over the past two months. |
XD for the 8p final tomorrow nice to see more interest in the stock |
Got to love a trade buyer of shares. They'll be more informed than any external shareholder can possibly be. |
Excellent - Lightship SA have just declared a 3.04% shareholding in BMS with 1m shares:
What's intriguing is that presumably this is connected to Lightship Chartering, "one of the world's leading bulk carrier brokers":
A strategic move, something trade or partnership-related, or simply a share in a cheap investment?
In 2020 Lightship lost an entire broking team to BMS: |
Just bought back in here for the first time in a while. A few factors have combined in recent days/weeks that have created perfect conditions for middlemen like Braemar. Market is slow to react in my opinion. |
What a civilised BB!
I am new to the world of shipbroking but it seems like something that we do well, so I will be taking positions here and in Clarkson soon. |
Thank you Catabrit, both your feedback positive and constructive is appreciated. If/when I write on Braemar again next year as an update, or if I write on other companies I shall bear these things in mind. |
Harry. I read your sub stack post. Just wanted to say that I thought it was a good piece of work. If I had one criticism it is that I did not think there was enough primary research in it (chats with customers, peers and other people in the ship broking industry). I also felt you could have added more colour on the disintermediation risk. Likewise, I don’t think there was enough ‘the industry is analogous to other broking businesses such as IB and commercial real estate and they trade at x, y and z multiples’.
(It’s worth noting the best of these such as CBRE and Colliers are moving towards more recurring revenue streams to booster their stock multiples as the market hates transactional work which is very cyclical.)
But overall, I found it to be a thoughtful and balanced piece of research and I hope you get the outcome you deserve. |
 Absolutely right, thumbs up. I phrased it as below in my review
"Over time the larger houses have gotten bigger as they have extended their capability set, and as they have proven the best at weathering the usual churn and turn of particular brokers or broker teams leaving to competition or set up their own house. The credibility of a big broker, the scale and broad scope of their offerings are all sustaining competitive advantages, but the industry remains highly structurally fragmented."
The compliance and ESG burden on shipping, as well as the compliance burden around Russia, is playing into the bigger players' favours IMO, and will be a helping hand towards further share consolidation over time. I would argue that the burden to set up a new shipbroker business is the highest it has ever been, and that is partly why you see teams jumping between ships nowadays rather than setting up from scratch. The platforms especially Clarkson has (Sea/ it is called) are real differentiators that have taken a long time to build. |
re Clarkson/Braemar, there is also the question for any bidder to evaluate what they are actually buying. Typically net tangible assets will be low, and the forward book provides only a measure of support. So what you are really buying are the key personnel, the star brokers if you like. What they decide to do is crucial. The stars can leave and set up their own operation - after all, that is how Braemar came to be. |
I am not sure who has already seen it, but there was news yesterday that Maersk Broker management are considering a MBO in combination with third party investor money. That is significant because they are one of the other top 10 industry players in shipbroking, and Clarkson were heavily rumoured to be in discussions to acquire them last year.
This takes me onto your question, Traders, of if Clarkson could buy Braemar. The industrial logic is obvious, there may be a competition question that would arise and I cannot say I am in a position to know whether it would be authorised (although the difference between buying Maersk vs Braemar is only a few percent of the total market share.
I did some back of the envelope maths for whether Clarkson could buy Braemar and what earnings accretion they would achieve.
If we theorise that they pay £140m for Braemar, which would still be well below Clarkson's own valuation but is a reasonably large premium for Braemar
- Clarkson lose £140m at let us assume 3.5% interest -£4.9mln
- but they gain let us say £12.75m of net income before synergies
- assume 2% of sales in further synergies is another £3m, taxed is £2m to keep the maths simple
- Total net income accretion of £9.9m
That is still 12% accretion even when paying £140m for Braemar.
Put that on Clarkson's PE multiple of 13.4X and total shareholder market cap creation would be £133m. So from a financial point of view the deal would make sense, but that is no surprise when Braemar is trading at a rock bottom PE multiple
This sort of a deal probably did not make much sense over the past years because Braemar was a bloated entity with low profit margin activities in many other areas. That Braemar is now streamlined and has a very interesting and high organic growth story in Risk Advisory may change that. But management's view of whether there would be a competition issue of course is the number 1 hurdle if this is a starter or a non-starter. I am happy for Braemar to stay independent but if Clarkson did an all cash or a cash and shares deal for Braemar, I wouldn't mind that if it let me access the upside through Clarkson instead. This is all theoretical of course, but as I discussed in my lengthy review, shipbrokers have not been scared of large scale deals, Clarkson included! |
Re Traders 3064. Cannot be emphasised too much that each and every option exercise results in a tax bill. If all the shares are kept then the tax has to come from their own pocket which is rather self-defeating.
Over many years watching these option exercises, I cannot remember a single one where the director/manager has kept ALL the shares, save perhaps for when the number of shares is very small.
The second relevant comment is that if options are NOT exercised in an accordance with the original terms, then they are forfeited forever.` |
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