Global Oceanic Carriers Share Discussion Threads

[luckyjonah] 25/2/2008 11:05

Thanks CB7.

[slapdash] 25/2/2008 09:27

GPRT RESULTS TOMORROW... I think the forward ratio is something like 5X and it is a similar company to GOC but is fully listed and more liqued and much larger....

also where from here for GOC???? is illiqued and you would hope would attract some buyers at some point... if just for the yield...

slapper

[slapdash] 22/2/2008 23:49

well I certainly hope this sector comes alight but we have to be wary

golden port results Tuesday and the GLBS coming up...

I know frieght rates wen tup due party to some port issues and so stuff had to be shipped from further afield into China.... these might not be long-term issues...

but I am of the view that it isn't a bad group of stocks to own....

we shall see.... slap

[cb7] 22/2/2008 19:18

lj, when the 7months results to 31/12/07 are released next month, my understanding is that they will declare a final divi at the 50% rate ... so it looks like being around 9.5p. Thereafter payments will be 1/3 and 2/3rds.

[tuckswood8] 22/2/2008 11:12

lj...... Where did you find the sale listings? The only one I could find last October when the rumours were around was for "GO Patoro". Did a quick scan last night and couldn't find anything else.

edit: Apologies...just found sale listings for Patoro, Public, Trader, Friendship, & Star on Compass Wk44 (Nov) 2007

[luckyjonah] 22/2/2008 10:28

tuckswood8, the last I heard management wanted to maintain a diversified fleet - yes it affects admin and maintenance costs due to differing stock, but it also smooths out the volatility in the BDI which is even more volatile by size. I would be surprised if they now switched back to concentrating on one size, eg. handymax.

[luckyjonah] 22/2/2008 10:26

It was actually the exact opposite - the entire fleet EXCEPT Patoro was up for sale last October:



I'm happy enough with the results as they were expected. I thought there would be a more positive reaction from those seeing the change in H1 profit who had previously not looked at GOC, however since these figures were only based off 5.3 ships in the period, a full 1H08 with 7 ships in action will boost the next results again - and hopefully that second step up in profits, together with the dividend payout, will bring in some new punters. Unfortunately, due to last year's hype the graph is probably offputting to those who don't run through all the numbers.

One thing I'm not totally clear on is that the proposed dividend scheme was 50% of net profit split 1/3 and 2/3 between 1H and 2H - so what are they doing for 1H07 which isn't going to have a 2H due to change of accounting date? Are they going to pay 50% in one go or only 1/3rd of that 50%?

[courant] 22/2/2008 00:03

I'll find the reference on TMF - secondhand information, sorry. You may well be right, that would seem more likely.

Courant

[tuckswood8] 21/2/2008 23:42

Courant..... Are you sure that the whole of the fleet was tentatively on the market in the autumn? My information is that only "GO Patoro" was being offered.

"GO Patoro" is the Capesize that doesn't really fit with the rest of the fleet and is on a three year charter with reducing rates. I suggest that the management felt that with the BDI riding high they might have attracted a good offer for the ship. The proceeds could possibly have been invested in a couple more Handymaxes, for which the chartering subsidiary seems very sucessful in obtaining good rates.

There was of course a rapid decline in the BDI which would have invalidated any such strategy, although the index is now recovering. As far as I am aware none of the fleet are at present on the market, either actively or tentatively.

[courant] 21/2/2008 22:43

Slap,

Yes, that is a good way of looking at it. Seen in that light, it tells you why GLBS should also command a greater PE now: its fleet will both last longer (it's average age is 6 years younger) and be more employable in a downturn (due to lower costs and greater operational flexibility).

No, I'm not professional :-))) It's just, I don't do things by half!

Sandlab - the reason the question was asked was that back in the autumn, GOC tentatively put its entire fleet on the market (on the quiet - someone on TMF works in shipping and saw it!). One can assume that there were no buyers at the right price!

Courant

[sandlab] 21/2/2008 19:51

The main part of the conference call followed the presentation that appeared at 4p.m. word for word. From prompting by the three questioners after the main presentation there were a couple of interesting statements.

The man from Jeffries asked if a sale of the whole fleet would be considered. The answer was, "Not in our minds", but there was a definite 'maybe' in the rest of the answer. The last questioner asked about upside potential for the two charters up at the end of the first half and the reply was that similar vessels in the market at the moment were seeing 50%-70% increases in charter rates. It was said earlier however that they were also looking at possibly replacing the two older units with newer units.

Interesting but nothing earth-shattering.

[slapdash] 21/2/2008 19:46

courant - thanks... I think one point you make is quite instructure though.. frieght rates might collapse say 4 years out.. that would justify a bigger risk premium and hence lower multiples... i.e. like the housebuilders... so multiple really a matter of opinion on risk....

just out of interest as you appear pretty professional.. you trade/invest for a living... interesting to see how this is written up tomorrow..

slap

[courant] 21/2/2008 19:19

slap,

Yes, you're right about rates and trade - there will be a supply spike sometime 2010-2011, but even if you take that into account (i.e. assume rates collapse), these are still good value because so much cash is being made now and these are still very fairly priced. (If you fancy, project cash flows forward for the entire duration of a fleet's life, assuming high rates remain for a year or two now and then collapse. The level they have to collapse to in order for you to make a loss is very low - but not negative ;-) - otherwise you're winning). The key driver is emerging markets growth, thus iron, coal shipments, plus grains and other ores. Both China and India have massive demand increases forecast. If you don't believe in that then, fair enough, the picture is less rosy for shippers. It's a call, but you don't have to be a raging commodities bull for an investment in dry bulk shipping to make sense. Have a read of GLBS or Hellenic's placing documents, or listen to some of the webcasts on shipping.capitallink.com

Yes, ship depreciation is included in the earnings figures. In many ways EV/EBITDA is a better way of comparing these companies.

Courant

[courant] 21/2/2008 19:08

CR,

The concept of earnings momentum doesn't really fit here: it's not like a company with growing product sales and/or margin improvement driving profits. FY08 should see something like 26p EPS according to my projections. There's not too much scope during 08 for GOC to substantially alter earnings (remember, 85% of 2008 is already accounted for). Of the 3 charter renewals, one should fall outside the accounting year (it's scheduled for renewal Nov 08, but that's a minimum period and the charter is likely to let it run the full course, because it's cheap!), and the other two are for the 2 oldest ships, one a small handysize and the other a panamax (granted a bigger ship!), so they're not going to achieve headline topping rates and these will kick in at the second half of the year. But that's not bad at all, plus there's the dividend.

Note there's been a change in year end (dec 31st is the new end, from may 31st, so we'll get "full year accounts" with 7 months out soon). We're now in H1 08: H1 08 (i.e. Jan-Jun 08) should see marginally improved earnings to H2 07 (Jul-Dec 07), but not too much, I make it something like 20-21c. H2 08 is where more action will be.

Courant

[slapdash] 21/2/2008 18:58

Courant - generally I agree.... I would say a few things though:

U.S. is generally much more highly rated in its stocks...

so yes future results will be good and yes ratings will probably improve..

My one or a few concerns are that yes there is massive demand from China and so freight rates are up...

but couldn't that be a cyclical thing even in a commodities supercycle..

i.e. more world trade sure but coudlnt' we get oversupply of ships... I doubt that is the case as most ship building places are probably already full and teh lead time to make a new ship bulding place is probably quite a while..

but does imply that at least in shipping we coudl have falling prices within growing world trade...

but generally am happy here.. key is to watch freight rates...

GOC should do well.... when this company starts to be analysed in the cold light of day people will scratch their heads and say p/e of 5...

one thing on accounting do they depreciate their ship values.. as obviously if these guys have just leased their ships (or even if they own them).. they have to get new ones in say 10-15 years.. time for some research...

GOC'S PRESENTATION SHOULD BE ON THEIR WEBSTIE... ANYONE LISTEN TO THE CONFERENCE CALL...

SLAPPER

[cockneyrebel] 21/2/2008 18:45

Yes Davebowler - the lack of posters is a comfort :-) Definitely not a lot of hype in the price.

Also the earnings momentum: 6.9c in H1 07, 10.4c in H2 07, 17c in H1 08.

At that pace they are on course for 24c in H2 and 41c for the year, about 20p eps.

If they are paying 50% of earnings in divi as they say that's going to be around 10p.

If you make some general assumption that the co grows earnings by 50% next year with this growth pace they may well be paying 15p divi next year and have earnings of around 30p.

If you net of the 25p in divi's you may well get over the next 18 months and the earnings do turn out to be 30p next year then netting of the divi's over 18 months the price you are buying at (over 18 months) would be a PE of 3.3.

Nothing guaranteed but a good guide to the valuation here.

CR

[courant] 21/2/2008 18:38

Re cheapness - I just don't believe the market has latched onto the structural supply/demand issues in the dry bulk shipping market. The shipping sector in the UK is small, no-one really covers it. Compare this with the US, where the dry-bulk sector has a market cap many times that in the UK, and the sector is well covered: valuations are *much* higher (double at least, depending on which measure you use).

Put it another way, if you took a quick glance at the fundamentals of the various UK companies (knowing nothing about the situation), you'd possibly conclude a few things: historic PE is not that attractive; next year PE looks good; shipping is cyclical; this clearly cannot be sustained. You'd probably pass it by. What you'd miss by not looking at detail at how these companies are run, and how the shipping market works is: forward earnings visibility and incredibly strong cash flows; the fundamental demand shift in dry bulk good shipments (China, India, S America); the extremely tight shipping supply situation. This all takes a little work to understand; it's not a standard industrial/retail/tech company. Thus, with total market cap less than £500m for all these companies, and a free float substantially less, the vast majority of market participants are not going to travel here. Hence cheapness.

Courant

[slapdash] 21/2/2008 18:18

courant - thanks for the comments...

these are "cheap" if you believe the rating is too low.... but it is all market opinon what to rate something...

interesting to see what GPRT does on its results on Tuesday..

On GLBS I found the spread is almost 10%... so you lose 10% just for buying and selling the stock... crazy on a £150m stock...... MMs get rich and we get poor.... may get more liquid we shall see...

slap

[courant] 21/2/2008 16:56

GPRT, I think these are pretty attractive at the minute. I cast my eye over them a while back but they were riding high at the time and looked a little too expensive (compared to GOC & GLBS). Must redo the numbers some time, but my gut reaction is that they're good value. They have the distinct advantage of being main market, thus open to many more investors. I'm not sure what the container market it doing at the minute, but their dry bulk fleet looks well employed. Due to their exposure to containers, they should suffer far less earnings volatility. A good buy, wish I had more free cash at the minute, there are good opportunities all around! That said, I'm pretty exposed to shipping through GLBS and GOC (around 30% of my small cap portfolio) so I'm reluctant to raise this much.

Brokers. Haven't looked at these in great detail. I must say, though, that I prefer the business model of the shippers with their medium term charter profile; you're right, I think the brokers' earnings will be more volatile. There could well be bargains here, I don't know.

Hellenic. Looked at them on float. Possibly attractive. They have two ships on the way and I'd like to see their actual delivery in order to de-risk. Plus, there's one charter to fix and I'd like to see the results of this too. They're still not as cheap as GLBS :-) Otherwise, they've got good charter rates secured on their existing fleet, operating costs are tight (less than GOC, more than GLBS). I'd like to see their post-IPO balance sheet. In short, one to watch.

Look, with these 3, and GPRT to some extent, the business model is virtually the same, and they're operating in an industry with superb fundamentals. As an investor, you have to make a call about which you invest in. There are differences in the levels of gearing and capital structure, the charter profile (and thus exposure to the BDI), the fleet profile, and overall valuation, but all are pretty damn cheap. There is an argument for investing in all three, as a means of diversification, but I've taken a call the GLBS is the most attractive of the lot - I currently own GLBS in a 3:1 ratio to GOC. If relative valuations change over time, I may switch out of one, into another, maybe into GPRT and Hellenic too, let's see!

Courant

[slapdash] 21/2/2008 15:09

courant - what do you make of GPRT???? I think they have largest market cap of this group... also there is another one recently listed Helenic something...

I'm not so keen on the shipping brokers as they no doubt have more volatile earnings.. i.e. these include Clarkson and Bramear seascope and probably a few others ( I think Hunting has a buisness here)..

However, Clarkson does appear lowly rated at the moment but not as lowly as these shipping companies such as Goldenport and GOC... so probably worth leaving ... a view you concur with?????

slap

[courant] 21/2/2008 15:01

I doubt it! These are worth way more than this.

Courant

[katsy] 21/2/2008 14:29

Oh dear, hope I haven't bought right at the top again!!! :-(

[slapdash] 21/2/2008 13:57

prefer goc and goldenport GPRT (bought more goldenport)

valuation isn't everything... it is also following and liquidity...

goldport has a good following and has results coming up Tuesday of next week..

slap

[courant] 21/2/2008 12:57

slap,

GLBS only floated in June - you can see their placing document (which includes a full set of accounts, plus more information on the company than you'll ever need!) on their website. Full year was 31 Dec 07, so we should see prelims out soon. GLBS is on a forecast FY08 PE of less than 4.5, with *lots* of scope for this to be enhanced (should shipping rates hold firm over the year, which looks more than likely taking into account the supply/demand situation), given their fleet deployment profile: they have 3 ships on spot rates, plus a further 3 contracts coming up for renewal from october onwards (including one, Oct 08, which is on a very low rate of USD17500 currently).

True, the spread is larger but they're quite easy to buy and sell - I think the free float is larger than GOC.

Courant

[slapdash] 21/2/2008 12:35

slap

Global Oceanic cruises higher on profit surge
Thu 21 Feb 2008

GOC - Global Oceanic Carriers

Latest Prices
Name Price %
Global Oceanic Carriers 127.00p +6.72%

FTSE AIM All-Share 993 +0.69%
Industrial Transportation 3,228 +0.74%

LONDON (SHARECAST) - Shipping company Global Oceanic Carriers sailed to a three-month high Thursday after it reported a huge increase in half-year net profit on revenue up 152% on the year before.

The AIM listed group posted a net profit of $6.9m for the six months ended 30 November 2007, up from $160,355 a year earlier, as revenue leapt to $22.5m from$8.9m previously.

"We will continue expanding our business and we look forward to exploiting new opportunities underlined by the sector's strong fundamentals and our company's strategic positioning in it," said chief executive Michael Tartsinis.

"We believe that our company is strategically positioned to benefit from the solid fundamentals of dry bulk shipping and take advantage of market opportunities as they arise," he added.

The firm, which has changed its accounting year end to December, said it will recommend a final dividend of 50% of net income for the period from 1 June to 31 December 2007.