Global Oceanic Carriers Share Discussion Threads

[courant] 17/10/2007 12:58

A better way of doing it is to look at actual vessel rates, which range from about USD1300/dwt for a relatively new ship to around USD300/dwt for a 25 year old+. So, given that GOC's average fleet age is 16-ish years, let's take 600USD/dwt as a representative value. Total fleet is 456273dwt, this gives a total fleet value around 274m. Less 100m debt, gives USD174m and a rough NAV of 220p per share. Also take into account that the existance of a time charter on a ship reduces its worth (unless it's at good current rates) - apply a discount to this and GOC could be attractive as a whole to a trade buyer wishing to expand his fleet at around 200p per share.

This is far more realistic and GOC is still very undervalued. Of course, if the BDI remains strong, then this should be considered a lower bound estimation!

Courant

[davebowler] 17/10/2007 12:43

Exciting thought- but our ships are 14 years old.
Another thought;I hope Ship years aren't like Dog years!

[sharpshare] 17/10/2007 12:38

NAV time:

According to

Second hand prices are (5yr old ships)
Capesize: USD 130m
Panamax: USD 79m
Handymax: USD 68.5m

If ships 5yrs old then Value of fleet = 1*130 + 2*79 + 4*68.5 = USD 562m

If net debt about 100m then equity = USD 462m
then NAV per share = 577p
on 40m shares in issue before adjustments to reflect charter contracts and age and condition of ships

[slapdash] 17/10/2007 09:25

a new high... a beautiful sight!!! Slapper

[slapdash] 16/10/2007 18:55

quite a move in GLBS today... be great if these boys could pull off the same...

surely just a matter of time.... one would hope... Goldenport doing well at new highs too...


Slapper

[m.t.glass] 15/10/2007 16:19

- and OCN/Wilsons is the biggest tugboat company in S.America - shepherding more tonnage of ships inward and outward than all other rivals combined (apparently). Though potential investors need to skim back a few months to grasp how the companies now relate to each other and to certain funds.

[davebowler] 15/10/2007 15:17

Robsy2 , OCN part owns a major port in Brazil via its recently floated Wilsons holding.

[amitkoth] 15/10/2007 12:45

Well, CKN is a good bet too, have a good bunch of different businesses that go beyond broking into trading, etc.

[robsy2] 15/10/2007 08:17

nice posts!
I am on board with commodities and shipping but what strikes me is that perhaps we should be looking at getting some exposure to ports, ship brokers/maintenance businesses and shipbuilders on an international basisi so we can catch the trends there as well.
Open question.Anyone got any smart ideas on these areas?

[theo13] 15/10/2007 00:12

Good article OC, thanks

jumped aboard here on Thursday - looks good till 2009 ;0)

[olivercromwell] 14/10/2007 15:30

Smiling Dry-Bulk Shippers See The Boom Times Lasting For Years (Marilyn Alva)

Fri Sep 28, 7:00 PM ET

If anyone knows about the perfect storm, it's dry-bulk shipping companies that ply the Seven Seas.

They haul iron ore, coal, grains and other bulk commodities.

Thanks to a convergence of factors -- including the growing needs of China and other developing nations -- they're also raking in more cash than ever. Charter rates are at record highs.

"We've already surpassed profits from last year," said Eleftherios Papatrifon, chief financial officer of Excel Maritime Carriers (NYSE:EXM - News).

Along with other dry-bulk shipping executives at an industry conference put on by Jefferies & Co. in New York on Wednesday, he predicted 2008 would be another banner year.

Others said the dry-bulk boom could last even longer.

Upbeat Comments

The upbeat comments came from some of the bigger dry-bulk companies, such as DryShips (NasdaqGS:DRYS - News) and Eagle Bulk Shipping (NasdaqGS:EGLE - News), and smaller outfits, including startup OceanFreight (NasdaqGM:OCNF - News).

They had their reasons, and not all of them pointed solely to China.

"We think the market is undervaluing India," said Sophocles Zoullas, Eagle's chief executive.

Citing a massive urban infrastructure project just getting underway in 62 second-tier cities in India, he said the need for steel and concrete will explode over the next several years.

Iron ore is needed to make steel, and prices are already at record highs. Shipping titans say industry buzz has iron ore rates going up 20% to 25% next year.

Demand for iron ore certainly isn't slowing elsewhere, either.

China continues to suck in much of the available supply from key source countries such as Brazil and Australia, leaving many other customers scrambling for what's left.

The supply crunch often means customers must tap into more distant sources, meaning longer ocean voyages -- and more revenue -- for shipping firms.

China also became a net importer of coal for the first time this year. In itself, that's good news for dry-bulk business. Also, like iron ore, coal customers besides guzzler China are pressed to bring in supplies from longer distances than usual.

"Charter rates are setting all-time highs on a daily basis," said Douglas Mavrinac, managing director and lead maritime analyst at Jefferies.

The average spot rate for large capesize ships averaged $150,000 a day last week, while smaller panamax boats fetched an average $75,000 per day on the spot market, according to Jefferies.

While its outlook on the crude oil and product tanker market is cautious over the next two years, Jefferies' view of the dry-bulk shipping market over that time is favorable.

In addition to strong demand for iron ore, significant new supply is coming out of Australia and Brazil to meet it, Mavrinac says.

"So there's more to ship," he said. "So much so, it's outstripping the number of new ships being delivered from shipyards."

Port congestion is adding to the vessel supply crunch. The long waits to unload in ports has reduced dry-bulk vessel capacity by more than 11%, said Diana Shipping (NYSE:DSX - News) President Anastassis Margaronis.

In India alone, he said, port capacity must increase by 130%. That's not likely to happen anytime soon.

Said OceanFreight CEO Robert Cowen: "The whole logistics chain is being pulled tight."

To keep up with demand, dry-bulk operators are stepping up ship orders.

In July, Eagle Bulk announced it would spend $1.1 billion to buy 26 new supramax vessels -- the smallest type of dry-bulk ship, for delivery starting next year through 2012. The firm acquired 39 other ships in the last two years for $1.5 billion.

TBS International (NasdaqGM:TBSI - News) expects delivery of four new ships later this year through the end of 2008. It has contracted for six new ships to be built in China for its core Asian and South American markets, at about $35.4 million each, with delivery expected in 2009 and 2010.

"These ships are sorely needed, especially as globalization goes forward," TBS' CEO Joseph Royce said.

Golden Ocean Group, listed on Norway's stock exchange, has ordered 23 vessels for delivery between 2008 and 2010.

Overcapacity

Since overcapacity is an ongoing concern in the dry-bulk business, the higher number of deliveries slated for 2009 and 2010 caused some to question the potential for rate drops.

But shippers waved away the concerns.

"Demand is overwhelming and will be from 2010 and beyond. You haven't seen the full strength of India," said Quintana Maritime (NasdaqGS:QMAR - News) Chief Executive Stamatis Molaris.

Not all of the boom in business comes from iron ore and coal. TBS transports all kinds of dry cargo, from fertilizer to finished steel. TBS's Royce said renewals from customers are "at higher (rate) levels than anytime in the past."

Jeffries' Mavrinac says rates will keep climbing through 2007, and that 2008 rates should be higher than in 2007.

Since they are more volatile, spot rates are typically higher than fixed rates. For now, firms that have more spot-rate exposure, such as DryShips, can "maximize their returns," Mavrinac said.

DryShips' Chief Executive George Economou said 98% of the firm's fleet next year will be left unfixed "to take advantage of the strong environment."

Genco Shipping (NYSE:GNK - News) is in the middle. It uses a balanced approach of both spot and fixed contracts.

Quintana's Molaris said his company has been criticized for its emphasis on fixed-time charters "in this boom market."

But he said, "We run the company to minimize market risk. We have significant upside potential for the risk we take."

Eagle Bulk also has a higher degree of fixed charters than spot-rate deals. But since renewals are likely to be priced at higher levels, as Mavrinac says, the company isn't shifting gears.

"This is the first time I've seen in my career charterers coming to us and asking for packages," Eagle Bulk's Zoullas said. "Charterers are saying, 'Give us more years.'"

end

:)

oc

[olivercromwell] 13/10/2007 11:18

nice article from yahoo.com search: not sure, maybe dated around june 2007

it indicates one fundamental fact - charter rates are driven and are closely aligned to the prosperity of the global steel industry. on this front china and the new kid on the block,INdia, are consuming ever increasing amounts of coal and iron ore which need to be imported from all corners of the globe - buut you have economic develpment taking place in s america, middle east and eastern europe incl russia which is unique. the urbanisation of rural populations in all these countries can only have a positive effect on the demand for infrsstructure products which canonly enhance the demand on global shippers. there are reports of america having to confront the dilemma of its aging infrastructure and we should see increased private/public sector spending on upgrades over the next 10 years.

start:

It has been a shaky few years for Global Oceanic Carrier ('GOC'). After listing in December 2004 to take advantage of an upturn in the dry bulk shipping sector, the company was caught on the hop in 2005 when charter rates considerably weakened. Generally speaking, dry bulk ships tend to contracted for 1-2 years. GOC was in the process of purchasing four second hand vessels, but the company quickly found itself in a precarious position as it was supposed to taking the delivery of vessels at a time when prices were less than ideal. As GOC was a small operation, it wouldn't take much too seriously undermine the business – which is exactly what happened. The company was forced to cancel the fourth vessel, at a cost of US$3.2 million, and had to put two other vessels into the 'spot' market on short term contracts to ensure they weren't sitting in the docks empty.

The share price was duly hammered, and the management found one of its large shareholders calling an EGM to replace the entire board of directors. The plot thickened however, after the resolution at the EGM was rejected, thanks in part to two new funds – The Trafalgar Catalyst Fund and Trafalgar Recovery Fund which had built up considerable stakes. The management may have survived the EGM, but their stay of execution was short lived. Within weeks of the EGM, Trafalgar appointed its own members to the board, and in the process some of the old board members were ousted.

The new management implemented a range of initiatives to cut costs, leverage the businesses asset to expand and most importantly, secure long term contracts for its vessels to improve earnings visibility. Thus far, the new team has delivered. Last week the group announced that the GO Pride has singed a new charter to run from June 2007 for 12 months at rate of US$18,500 per day –almost double the previous rate. The GO Faith has also been charted for 12-14 months starting in May for a rate of US$28,000 per day. GOC has had a stroke of luck. Despite the wobble in dry bulk rates in 2005, the price has recovered somewhat since then, which is attributed to two key factors. First dry bulk rates are dictated predominantly by demand for iron ore and coking coal. 98% of global iron ore demand is for the steel industry. A large proportion of coking coal is also used in the steel industry. At the same time, over 50% of global dry bulk shipping is coking coal and iron ore.

The result?

Dry bulk shipping rates are closely linked to the health of the global steel industry, and the largest producer of steel in the world is China. In fact, China produces so much steel, that despite it veracious appetite for all things related to its impressive growth, it actually is a net exporter of steel. China is also influencing the dry bulk shipping industry in another way. While China is an emerging economic superpower, it is also a very long way from the sources of many of the raw materials it requires. Headlines are often littered with news of Chinese trade officials cutting deals in South America, Canada, Africa and Australia to secure sources of raw materials. This equates to longer shipping routes to deliver materials, which in turn means ships are tied up for longer periods delivering their goods which in turn applies upward pressure on shipping rates. This combination of increased demand and longer shipping routes has buoyed charter rates – good news for GOC.

This is a cyclical industry heavily influenced by the global steel industry, something to keep in mind, but projections for the next 3-4 years for the steel industry suggest charter rates will remain favourable. There is one other factor that comes in to dry shipping rates each year – wheat. 11% of dry bulk shipping is dedicated to wheat, so each year in the autumn the prevailing success or failure of the wheat crop can affect rates.

House Broker Jefferies International initiated coverage with a buy rating and 120 pence price target for 2007. The price target in particular applied considerable discounts for the company's short trading life, wobbly track record, and illiquidity and small market capitalisation. Which begs the question – when will GOC warrant a valuation comparable to its peers? Food for thought.

end

oc

[slapdash] 12/10/2007 15:04

I must say it is disappointing to see sellers keep on coming..

Slap

[slapdash] 12/10/2007 11:06

as this is a recovery stock it is perhaps unsurprising that there is a lot of selling....

Also it does have more risk...

However, I would hope to see some progress to above £1.50 in the near future...

Slapper

[courant] 12/10/2007 07:32

M.T.Glass

"The latter only floated in June and is perhaps merely finding its level.. "

Nothing to do with level, this is about cash! GOC and GLBS are about equal on various valuation measures, GOC slightly cheaper for a slightly worse fleet profile. However, looking forward GLBS has far more scope for earnings upgrades as its looking to secure half its fleet in the charter market in the next couple of months, which has been exceptionally strong recently. GOC will have to wait till May, when the market may have moved either way. Of course, it may strengthen, in which case GOC will do very well! But that's not guaranteed and I place higher value on certainty now.

Thus I hold both but favour GLBS. Both are exceptionally cheap.

Courant

[bigbigdave] 11/10/2007 21:30

8-)

Dave was a fine keeper, had a tendency to lean over backwards later in his career.

Here's to a competitive season, without Chelski or the Scousers.

Man City, hmmmmm. When I was a youngster I was a City fan - had to be, lived next door to the full back. Besty broke his leg - Uncle Glynn.
Years of doom and gloom forced me to be a Red.
Can't see City keeping this up on past seasons, but who knows, Sven?

bbd

[m.t.glass] 11/10/2007 21:24

Hi tux. My fulltime trading season is supposedly Nov-Dec-Jan-Feb, but there's just too much going on, so i gave in to temptation and started early this time around ;o)

[cockneyrebel] 11/10/2007 21:21

Didn't he put the ball over our crossbar from 12 yards in the FA Cup too :-)

You can't live on that goal forever :-)

CR

[bigbigdave] 11/10/2007 21:17

Cough Cough! Giggs! 8-)

[cockneyrebel] 11/10/2007 21:13

hi bigbigdave - there was only one Seaman , Dave Seaman :-)

CR

[olivercromwell] 11/10/2007 19:46

cr,

great to have u on board, if you'll pardon the pun...groan

oc