Braemar Share Discussion Threads

[mount teide] 04/7/2019 10:16

CWA1 - No - there are much better alternatives for investing in the shipping market:

The following should make sobering reading for the BMS management and its investors:

S/P Performance Comparison - CKN / BMS - from Global Financial Crash low in 2010 to date:

BMS / MINUS 13.9% / (215p down to 185p)

CKN / PLUS 607.9% / (356p up to 2520p)


S/P Performance Comparison - CKN / BMS - from the 2001 last market cycle low to date

BMS - MINUS 2.6% / (190p down to 185p)

CKN - PLUS 2,420% / (100p to 2,520p)


As in most sectors its usually a smart move to stick with the market leaders.


My modest portfolio investment in BMS after the dry bulk and container shipping markets bottomed in 2016 was made on the basis i expected BMS along with the rest of the shipping market to commence a recovery - i got this wrong (because of BMS's hugely overweight exposure to the tanker and oil service sectors) and departed with a circa 10% loss, which after re-investment in CKN(already held a very large longstanding position), has since recovered the loss and is now up around 20%. Would have been circa 50% down if i had continued to hold BMS.

[cwa1] 04/7/2019 09:23

So, MT, does all that make you a buyer of BMS? ;-)

[mount teide] 04/7/2019 09:09

13 is unlucky for some - clearly not the Baltic Dry Index (price of the global shipment of commodities) which increased its winning streak to 13 days yesterday with an astonishing 7.12% increase to close up 103 at 1,549.

BDI is now up an incredible 45.7% over the last 13 days and 160.3% from the Feb higher low, while the FTSE 100 has returned +6.7%.

Wonder what the shipping industry 'Guru's at Zero Hedge make of it all after predicting armageddon for the BDI/shipping industry in Feb 2019 - how wrong can you be?

The good news? The BDI needs only to go up another 661% to get back to the last inflation unadjusted shipping/commodity market cycle peak of over a decade ago!

I doubt that will occur but a BDI peak for this market cycle of around 5000 - 6000 should be a realistic target over the next 3-5 years. The index appears to be starting to factor in the impact of three future events(one is certain, one highly likely and the third a strong possibility):

* IMO 2020 Low Sulphur Fuel Regs

* A Chinese / US trade deal in H2/2019

* US oil sanctions on Iran generating an escalation in attacks on shipping pushing up the oil price.

Likwewise oil tanker charter rates should have a strong 12-18 months from the impact of the same three events above - charter rates doubled overnight following the recent attack on shipping in the Persian Gulf, while war risk insurance premiums went up 10 fold.

[spooky] 03/7/2019 07:42

If you can actually believe what the management are saying,which is debatable in my opinion.

[cwa1] 03/7/2019 07:22

AGM Update:-



Outlook

Overall, the first quarter has begun in line with our expectations and we continue to be positive about the prospects for the remainder of the year.

No shooting out of the lights-but possibly better than the share price has been indicating?

[talygarn tom] 02/7/2019 10:39

I don't see anything but blue sky here. Shipbroking, by far the largest division is performing well with the Baltic Dry index moving north rapidly, technical won't impact the operational results any longer,logistics is stable and there is plenty of potential in the financial division pipeline which is their most profitable division in percentage terms. And you get paid a decent dividend while you wait.

[edmundshaw] 23/6/2019 21:42

I agree that it is often best to exit as soon as the management smells bad. My problem here is the management doesn't smell good, but seems odourless...

This is in fact my only losing position at the moment (which is not always the case with my shares, and is partly due to selling out of a couple that were either losing or back to breakeven with a bad smell). I still have no idea whether I should hold on or exit BMS - as you say it is solidly undervalued if only management can get its act together. At the moment the dividend says I can afford to defer my decision...

[mount teide] 21/6/2019 10:53

Edmund - posted on here that i had exited BMS and added to a large long term position in Clarkson as it was better diversified, since BMS was paying a heavy price for management foolishly taking a hugely overweight position in the tanker and oil service sector only to see oil tanker charter rates subsequently drop 10 fold.

Continue to follow BMS because with better management it has the potential to outperform the sector, not least because the performance over the last 5 years has been much worse than the rest of the industry - and extremely disappointing for shareholders. However, seen little to suggest the necessary change to the executive management(CEO) is likely to happen anytime soon.


Neil - 'I will also pick up on this stupid comment. You don't hurt them, you hurt yourself.'
Really - reality in fact is often quite different!

In my experience, with poorly performing investments the best loss is usually the first loss - holding onto my investment in BMS would have seen the loss increase from 10% to nearly 50%.

Posted on Advfn that i exited at close to break even a position in Trinity Exploration last August in disgust(after being over £130k up), as a result of management diluting shareholders with a massive placing at a 45% discount to a recent market high. Put the funds to work in Jadestone Energy - Result: the new investment is 170% up compared to leaving the investment with the management of Trinity, who all shamelessly filled their boots in the placing and are now down 30% on that investment such was the market's dislike of their behaviour.


AIMHO/DYOR

[neilyb675] 21/6/2019 10:17

"by hurting them the only way i could by selling down my position."

I will also pick up on this stupid comment. You don't hurt them, you hurt yourself.

[edmundshaw] 21/6/2019 10:01

"If i were still a shareholder i would oppose this shameless display of management greed by hurting them the only way i could by selling down my position."

I don't believe you MT. I think you might want to exit at some point if you thought returns were likely to be poor. But you are too bright to spend your money on making nigh-invisible statememnt trades...

However, I share you disgust...

[mount teide] 21/6/2019 00:07

Considering the appalling performance of the company over the last five years it is astonishing that anyone could have been awarded a Bonus - never mind one of a size that THE PART OF IT AWARDED IN SHARES IS WORTH CLOSE TO £400K!

How can an any Manager earn a bonus, with just the part paid in shares, greater than the £350k annual salary of the CEO?

The finance director who left last year was given a circa £500,000 golden goodbye.

A hugely underperforming Board responsible for delivering a massive 72% drop in the company valuation, yet still continues to reward themselves as though they were shooting the lights out.

If this is how they reward themselves with shareholders cash for complete failure, the mind boggles at to how they will reward themselves should they achieve a modest improvement in performance.

Releasing that RNS well after the closing bell on a Thursday is offensive, underhand and unprincipled.

If i were still a shareholder i would oppose this shameless display of management greed by hurting them the only way i could by selling down my position.

[smicker] 20/6/2019 23:03

194000 free shares as a bonus!!!!! I'm speechless

[mount teide] 20/6/2019 11:38

Lloyd's list today reports War Risk Insurance Premiums have surged ten fold for oil tanker owners following the latest Gulf Attacks on shipping.

War risk premiums are paid by tanker owners EACH TIME they send a vessel to the Persian Gulf to load a cargo.

Clarksons Platou Securities reported that VLCC ship charter rates, as of June 18, averaged $22,100 per day, up 63% week-on-week, while third quarter VLCC rates in the forward freight agreement (FFA) market were $25,000 per day.

Deutsche Bank shipping analysts in a client note said “charterers need to pay a premium to bring vessels into the Arabian Gulf. VLCC spot rates jumped 100% in the Middle East region and 26% overall last week".

Rising dangers in Middle East waters are likely to slow down tanker operations. The more inefficient operations become, the more that capacity is effectively reduced, a tailwind for rates. There would need to be increased international protection for ships transiting the region, with some possibility of escorted convoys. This would slow the tanker logistics for loading and unloading.

Shipping has a unique appeal to a certain breed of risk-reward investor for two primary reasons. First, global shipping rates are completely unregulated. There’s no one with the authority to declare that a rate is too high or too low. The market ALWAYS decides.

Second, rates can gyrate wildly due to global events that are largely unpredictable. A ship owner or charterer can wake up one morning and suddenly find himself well on his way to being either very rich or broke, often through no fault of his own.

World events are now coming to the fore in global shipping. The crude oil tanker market has become heavily contingent on the outcome of geopolitical tensions between Iran and the US, while the container market will go one way or the other based upon the outcome of trade tensions between the US and China.

Higher future's market charter rates for both and the dry bulk sector suggest a resolution of the trade tariff spat between the US and China is not far away, while tanker futures suggest the Iranian/US geopolitical tension is unlikely to be resolved anytime soon.

[dtaliadoros] 20/6/2019 10:33

What a dire holding this has turned into. Am tempted to purge this one from my portfolio.

[topvest] 08/6/2019 16:11

Just been looking at the annual report. New Chairman sounds sensible. Impairment review note, suggests Ship broking is worth c£100m, c£25m for Financial and c£10m for the rest, less net debt and consideration due of c£30m. Say £100m versus the £63m market cap. Probably worth 250p or so, if trading continues to improve. The balance sheet is weakened, so I think there is still some risk of pushing the dividend back to 10p. Dividend strategy is under review. All things considered though, I think this is a hold.

Chairman seems focused on building the higher return businesses - that's the way forward. Technical Services was a disastrous foray. The ship broking business needs the focus as that is the core business. To be honest, I don't much like the Financial side as these are on big earn-out's so don't really offer much value to the group. All the profits are paid to the vendors for the next few years.

[mount teide] 26/5/2019 12:10

Maritime Freight Transport forecast to grow at a CAGR of 3.6% through to 2050


OECD - FREIGHT DEMAND WILL TRIPLE BY 2050 – NEW REPORT / Lloyd's List

According to a major new OECD report global freight demand is set to surge in the coming decades.

The report considers a range of transport demand scenarios through to 2050 and concludes global freight demand will triple between 2015 and 2050, based on current demand growth rates.

“The projected compound annual growth rate of freight through 2030 is 3.1%,” said the report. “Freight demand will grow faster over the longer term, at 3.4% through 2050.”

However, it said projected demand could shift as a result of increased protectionism but also due to improvements in freight transport capacity in countries or regions with significant growth potential. “In Asia, for instance, capacity will need to increase substantially to accommodate future freight transport demand,”.

Based on mid-range scenarios for freight demand, the authors said that the current demand pathway will see maritime freight transport grow at a compound annual growth rate of 3.6% through 2050, a near tripling of maritime trade volumes compared to now.

“The economic value of freight flows in the North Pacific and Indian Oceans will increase nearly four-fold between 2015 and 2050,” it noted. “Approximately one third of all maritime freight movements in 2050 will take place in these two regions.

“The North Atlantic Ocean will remain the third-busiest maritime corridor, with 15% of maritime freight movements in 2050, equalling 38 trillion tonne-kilometres.221;

The relocation of factories inland in China in a bid to cut production costs could hurt demand for maritime shipping to Europe, however. “This may impact mode choice for Eurasian freight flows if these relocations significantly increase the time and cost of maritime shipments relative to inland modes,” it added.

More than three-quarters of all freight will continue to be carried by ships in 2050, with the remaining goods transported by road (17%) and rail (7%).

“Surface freight flows in China and India taken together made up 37% of total surface freight flows in 2015,” said the report. “By 2050, Asia, including China and India, will be responsible for over 54% of global surface freight demand.'

[shalder] 20/5/2019 22:43

We may be entering that part of the corporate cycle known as "stick to your knitting" (or return to it as the case may be), which has to be a good sign.

[topvest] 20/5/2019 21:28

The new Chairman appears a welcome addition, so looks encouraging I would say.

[masurenguy] 20/5/2019 15:31

Crazy spread being quoted. I made a small top up @201.9 earlier which is showing as a Sell.

[emeraldzebra] 20/5/2019 11:48

Classic cyclical business. Would expect dry cargo in particular to move much stronger -as more ships will be heading for demolition and order books cautious. Management don't compare well to Clarksons, and can not comment on the rest - but still looks oversold, and would expect a recovery to £2.50 or so in the medium term.

[mount teide] 20/5/2019 09:47

Business Highlights

'Shipbroking traded ahead of expectations and in particular had a strong second half, notably in Dry Cargo and Tanker'

The outlook statement does not specifically mention how these shipbroking sectors performed since year end - Clarkson's May 2019 Trading Update offers some insight:

'Spot negotiations within broking have been in line with expectations during the period. This is despite the average ClarkSea index, which reflects earnings for the main vessel types in shipping, being 6% lower in the first 4 months of 2019 than the average for the whole of 2018 and 22% lower than the final quarter of last year.

We highlighted at the full year results that dry cargo freight rates started the year with significant challenges. This environment continued through to the end of April, evidenced by the Baltic Dry Index which, was 40% lower than the average for the whole of 2018. We continue to believe that this market will start to improve as the year progresses. Strength in our other broking divisions is offsetting this weakness and the outlook for our broking business remains positive.'


The Baltic Dry Index experienced a poor start to the year as a result of a number of exceptional factors layered on top of the usual negative January impact of the Chinese New Year shutdown; including a particularly active southern hemisphere cyclone season seriously affecting operational performance at the globally important Australian bulk terminals, together with the tragic dam failure in Brazil resulting in the shutdown of a material volume of Vale's iron ore business.

Nevertheless, the BDI is now on a recovering trend and is forecast to experience a much stronger H2/2019, as should the tanker sector in the run up to the introduction of the new IMO Shipping Fuel Regs in Jan 2020.

[psync] 20/5/2019 08:45

Strange world we live in when this is going up. Dividend looks safe, at least for now.

[edmundshaw] 20/5/2019 08:41

Still a 7.7% yield! And better cover. And a good looking disposal...