Globus Maritime Share Discussion Threads

[kinbasket] 20/10/2008 17:11

Given that two of the ships were in the spot market during the summer when rates were super high and the others were on long term charters with unchanged rates. I reckon we are still looking at EPS ITRO 85p for YE 2008 so I'm not too concerned..yet.

We aren't without problems though

Firstly, two of the ships are up for renewal any day. Not the best time to be looking for buisness :-( .

Secondly, the Loan rate is linked to libor IIRC.

Thirdly, I'll feel more comfortable when we have the cash from the sale of Globe in the bank. That'll help reduce the effects of the second problem.

Part of the problem with rates at the moment is the Letters of Credit issue. It's having a serious effect on the shipping market. Give it six months to flush through and then we'll see at what level rates really should be.

All those new ships (and shipyards) we've been promised are unlikely to happen so it'll be interesting to see how this plays out.

With a yield of about 25% if divi policy is maintained I'm not stressing out just yet.

[courant] 20/10/2008 15:34

No, just hard at work! Interesting situation this. By rights, -45% (less the divi) return on my holding of over a year isn't too bad relative to AIM, but it's not great!

The question really is not how the short term rates are looking, but rather what's the outlook over the next year. It will probably be a brave man to call this. It's clear that China has literally stopped shipping in ore, and this has been the main rate killer. Will this last? How long will their stockpiles last? Is chinese growth going to go completely off the rails? I suspect not, but it's a question of time frame.

I'm watching and waiting. If global growth goes completely down the pan, then there's a big issue here. If not, then this could well become an interesting recovery play.

Courant

[slapdash] 20/10/2008 13:52

Courant - no comment??? Presumably in shell shock on the rapid reversal of fortunes????

Slap

[slapdash] 16/10/2008 13:30

Courant - well I guess now we know the answer... these stocks were cheap for a reason...... earnings prospects can disappear in the space of a month or so...

Slap

[slapdash] 29/9/2008 09:51

Courant - risk is that we are not fully discoutning the possibility that the BDI will go below 2500 and stay below there for sometime... also that some ships will be empty.... I don't have the answers on these two concerns... and GLBS does have a low cost base... we shall see... but I would guess earnings for the coming years will be far below what was originally thought...

Slap

[courant] 28/9/2008 18:56

Also, on the plus side, the dollar movements have given an instant boost to earnings/divis!

Courant

[courant] 28/9/2008 18:54

I admit the short-term outlook for the BDI is a little uncertain, both on the supply and demand side. There's a big question mark about how much global growth has come off the rails; also, it's clear now that the credit crunch is impacting new builds, with slippage and cancelled orders being reported. Who knows? Not me!

However, I do know that GLBS is cheap and for that reason alone I'll hold, obviously subject to revision depending on how things go - my warning lights will start to flash a little if/when the BDI goes below 2500, because that's my feeling for where the long-term break-even point is for GLBS.

Their ship sale looks a very good move now!

Courant

[slapdash] 28/9/2008 10:58

well I think that the concern might be that the so-called second half rebound in the BDI won't happen. That 2009 will see a very weak BDI. That some ships will be empty.

This apparently is happening off Brazil as given that the Brazilian companies want higher iron ore prices no one is buying off them which means ships off Brazil are empty and getting no charters.

Next we have the uncertainty of all the new ships coming on in 2009.

So I think I am a little cautious here and feel earnings will probably not be met. That does't mean that this stock isn't cheap. It does mean that it becomes hard to determine what rating the market will award this company.

All in all I have come to the view that these kind of stocks are ones to swing trade rather than hold for secular growth.

Slap

[courant] 28/9/2008 09:26

No, far from it! I see this as short term issues - still very happy to hold for the longer term.

Courant

[slapdash] 27/9/2008 20:20

Courant - I presume you have sold????

Anyway, although things don't look great for this company due to falling freight rates its low cost base should mean it will survive. We shall see.

Slap

[wjccghcc] 10/9/2008 12:28

Cuts debt by 35% which is probably prudent in these uncertain times and it was on spot charter so exposure to the recent BDI fall has reduced considerably as well. Seems a smart move.

[bluesky4] 10/9/2008 12:18

interesting sale... profit of about £12.5m... but not really sure how they will be able to buy a vessel that is so earnings acretive given that vessels have risen in price... perhaps they are gambling that the cost of vessels will fall.. or just cashing in some of their chips...

In terms of cash puts about £26m on their balance sheet... in the presentation they said that while spot rates had fallen vessel prices hadn't so they maybe are taking advantage of this...

Their last interims show non-current liabilities of £75m... thus if they choose to they could reduce their debts considerably - by just over a third.... in any event their cashflow should help them do this going forward as well as they have certain benchmarks for paying off debt....

Taken together with a director buying £130,000 of stock is fairly positive but what is obviously key is demand for shipping going forward....

Why not just sell the whole fleet and sit on cash until the market weakens??? Then they can buy ships for much less as competitiors go bust and frieght rates stay low....Courant what do you make of it????

Blue

[slapdash] 04/9/2008 10:31

so really we are up 7p!!!!!!! Whoopee...

Slap

[wjccghcc] 04/9/2008 10:13

says XD on my screen. The XD date is 1-2 days before the record date to allow time for shareholder register changes.

[slapdash] 04/9/2008 10:08

thought it was tomorrow

[wjccghcc] 04/9/2008 10:00

26.9p xd today.

[slapdash] 04/9/2008 08:53

well all that excitement for nothing... stock down... ex div tomorrow...

forward p/e less than 3X.... after div paid... Slap

[slapdash] 04/9/2008 00:14

Purchase of about £120,000 by a non-executive director... hmmm..


3 September 2008

Globus Maritime Limited
Director/PDMR Shareholding

Notification of interests of directors or other persons discharging managerial
responsibilities and issue of new shares

Globus Maritime Limited ("Globus" or the "Company") (AIM: GLBS) announces that it was
notified today that Mr. George Feidakis, the
Non-Executive Chairman of the Company, has purchased an aggregate of 31,564 ordinary shares of
US$0.001 each in the Company at the price of
430 pence per share, as follows: on 29 August 2008: 12,000 shares; on 1 September 2008: 15,664
shares; on 2 September 2008: 3,900 shares.

[slapdash] 01/9/2008 07:45

HCL results out... they appear to have a different strategy of locking in forward frieght rates for the years ahead.... also they are acquiring more ships while GLBS is sitting on the sidelines... interesting in their statement tha they say they "believe" in a strong frieght rate market.... sounds a bit of an odd thing to say as sure but what about new ship building: (from their results)

"We believe in the continued strength of the dry bulk shipping market due to the
sustainable demand from developing economies as a
result of their urbanisation and infrastructure development.

Slap

[courant] 28/8/2008 16:46

More back of the envelope calculations...

Assuming rates stay constant between now and december, GLBS could fix 6 ships on TCs of around 3 yr duration at USD45k. This would bring the EV/EBITDA down below 4 with a guarantee of earnings almost 3 years into the future. This is crazy - GLBS would have to really mess up not to earn back the share price in cash plus pay off the debt within 5 years, effectively leaving you the owner of 8 ships fully paid off and cash for your shares. Silly valuation, there's virtually no real downside in this share price! (although the share price will no doubt do what it may in the meantime!)

Cheers, will listen to the conference call later.

Courant

[slapdash] 28/8/2008 13:36

HCL results out soon too...



Courant have a look at presentation. Am listening to conference call....

they say slide 6 that their cost base is 6,030$/vessel/day


They anticipate a strengthening of spot market and that will be the opportunity to fix rates...

They say they are at discount to NAV... and that there is a disparity between current low freight rates which have fallen and the price for ships which has stayed high... see slide 8

Market Environment
The BDI reached an all time high of 11,793 points on May 20th with the avg spot 4TC rates for Capes at $175,327/day, for Pmax at $74,359/day and Smax at $60,250/day. Since then spot rates have deteriorated to $123,092/day for the Capes, $47,935/day for the Pmax and $45,475/day for the Smax. This decline is mostly attributed to:
��
Sharp decrease of Indian iron ore exports due to the monsoon season and the increase in export tax.
��
The Argentinianfarmer strikes.
��
Normalization of iron ore imports to China post agreement for the iron ore contract prices.
��
Reluctance of the Brazilian shippers to split Capesizeparcels into Panamax in an effort to reduce port congestion.
��
China's slowdown pre Olympics
��
Lower world port congestion
We expect the market to recover in H2
��
Spot rates are lower than short TC rates => expectations that market will improve -Analysts predict a strong Q4.

[courant] 28/8/2008 08:25

I have no real idea what the freight rates going forward are going to do. But I do know that the risk-reward is stacked in my favour here. The worst case scenario is that the BDI slumps to 2000 tomorrow (IIRC this is what was seen in the shipping slump early 90s) and all their charterers go bust, leaving them with an unfixed fleet. In which case, GLBS cans the divi and will just about be able to make the interest payments. If that continues over the lifetime of the fleet, we don't make money, but it doesn't go up in smoke either. Any recovery in rates, we're quids in.

View investment return here as a function that looks like a time integral of the BDI (i.e. the area under the graph going forward 15 years). You need to "colour in" a certain amount of that area to break even - anything else is profit. That break even area in this case is very small, and covered in a large part by current rates and charters. Thus, you don't have to know what future rates will be to know that you won't lose money, although clearly, how much you make depends on forward rates.

Courant

[slapdash] 28/8/2008 08:00

Courant - sorry your answers are above.....you going to listen to conference call???? GPRT also had results today but a more complex picture.... I personally find this area hard to analyse as it all comes down to how freight rates might pan out and like everyone I really have little idea on that... i.e. pretty much everyone, even industry insiders, got the oil price wrong... so can we be confident what freight rates will be in two years??? I suppose if you believe the so called "stronger for longer" argument then this is the kind of company to hold... and should return circa 25% as a dividend in the next two years...

Any more thoughts on freight rates for the next few years??

Also on your breakeven analysis for frieght rates or the rate needed for a 5% yield... we must be careful with this as interest payments could make the breakeven level different for each company..... that is one worry for me to have gearing in a notoriously cyclical sector.... my other concern is that while we have had great luck on the upside the same could happen on the downside with frieght rates.... i.e. if there are too many ships rates could fall below the breakeven level as companies seek to cover as much of their fixed overheads as possible.... I think this is what happened in previous down cycles... too much supply and hte industry is stuffed.... just look at the market for flats in Spain or Florida....

Personally I would like them to get rid of gearing and have a cash pile... not expand too much ... also to fix freight rates on a good rebound..

Slap

[courant] 28/8/2008 07:59

Slap,

Couple of things: with an EV/EBITDA approaching 4 and ships fixed for 2-3 years, plus a average ship life in their fleet in excess of 15 more years, you're basically going to be earning back the EV in cash over a very short period, with the rest in for free. It would take a *serious* collapse in rates for you to lose money on this one. Can't remember which webcast this was on, but GLBS's CEO stated that when looking at long term profitability of a ship, they use a worse case BDI value around the 2/3000 mark. Which tallies with my back of an envelope calc: shipping rates a quarter of current value would give them a net yield per ship around 5%, which is about the same as long term interest rates. Every day the BDI stays above this is cash in the pocket effectively.

The BDI has seasonally been weak over the summer months due to low transactions - things have geared up in the autumn. Whether this will happen again this year is an interesting question. Very interesting, because if rates firm up, GLBS will be in a tremendous position to be able to fix 6/8 of their ships in this period. Excellent risk-reward position: continue as they are and they'll earn very decent money; if rates spike, they'll be earning serious money into 2009 and beyond. All this protection against rate collapses in the future. Also interesting to see how the credit crunch impacts ship supply, and how china fares post olympics. Plus india, of course.

US firms in general are rated quite highly and, if anything, have higher payout ratios and are more highly geared. UK shippers are cheap in absolute terms, not even allowing for their conservatism.

Courant

[courant] 28/8/2008 07:43

Excellent interims, all on track for 100+p EPS - current year PE ratio is under 4 and EV/EBITDA 4.7. With 3 more ships coming off their current low charter rates in the next few months, we should see a boost to earnings in 2009.

Plus, the 6.6% *interim* dividend is nothing to be sniffed at :-)

The only slight negative is the cost increase, but this seems to be well contained and is a smaller fraction of revenues compared to last year.

Courant