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Posts Tagged ‘Shipping’

First Ship Lease Trust looks interesting

In Energy, Shipping on 25/08/2011 at 8:33 am

Billionaire Wilbur Ross is betting that the slump in shipping which drove oil-tanker returns to a 14-year low is ending.

Ross & Co manages about US$10bn in assets, is part of a group (including China Investment Corp, China’s SWF) spending US$900 million on 30 ships hauling gasoline, diesel and other refined products. It is Mr Ross’s first shipping investment and deploying ‘another few hundred million’ in the industry ‘is certainly easy to do,’ he said in interviews in August.

That outlook contrasts with the pessimism of John Fredriksen, founder of Frontline Ltd, the biggest operator of the largest crude carriers. The 67-year-old billionaire said in May that it would probably be another year or two before ship values collapse and he can start adding to his fleet.

So can we imitate Ross by buying SGX counters? NOL and Samudera have container fleets. So do Pacific Trust and Rickers Maritime. BerlianLaju has the world’s 3rd largest chemical tanker fleet, more than 93 of them, but they are not the ships Ross and friends are buying.

But there is FSL. It has a fleet of 16 tankers and seven container vessels. Of the 16, 11 are product tankers (what Ross is buying), two crude tankers and three chemical tankers (presentation August 2011). But this is a tricky company to analyse, so do yr homework. It is also a shipping trust and such trusts are yield plays.

Why you may want to buy NOL

In Shipping on 17/03/2011 at 5:48 am

A leading global private equity firm has a venture with a leading owner of container ships  to buy container ships. They must believe that rates will rise. The brave hearts may want to try their luck with Samudera and those shipping trusts that have fleets of container vessels.

Carlyle Group formed a joint venture with Seaspan Corp, the Washington Family and the Tiger Group to buy more than US$5 billion worth of vessels with. Seaspan and Washingtonwould invest solely in container vessels purchased by the newly formed firm. Seaspan charters container ships to shipping lines and is one of the biggest players in this market segment.

We believe there is a compelling opportunity to serve Asia’s continuing growth in demand for shipping capacity.” The joint venture will invest equity capital of US$900 mill ion in the next five years, buying container, dry bulk, tanker vessels and other shipping assets.

NOL: Don’t buy it for the wrong reasons

In Economy, Investments, Temasek on 21/01/2010 at 5:27 am

NOL’s and other container lines’ shares are in demand, with the recovery in world trade expected to lift freight rates despite the surplus of ships. “[M]ore than a tenth of the vessels that transport the world’s manufactured goods in containers are idle. For most, orders to sail will not come for some time.”

(Aside, NOL tried not order new ships when David Lim returned to NOL, after a stint as an acting minister. He tot the other liners were crazy to order new ships despite a surplus. But in the end, NOL too joined in because the ordering frenzy continued. Sadly, it did so  juz before the market turned, but didn’t order as many ships as its bigger competitors, though as it ordered late, it paid higher prices.)

Buy into NOL because of its operational gearing into a recovery, not because it is a highly geared financial play into shipping (it isn’t) or because it can buy cheapish assets and gear up (it’s not a buccaneer).

Short of plans to buy assets, NOL did not need the S$1.4b in raised last year. NOL, which had then S$400m in cash reserves, would have almost less than 2% net debt (45% of equity at the end of 1Q of 2009) against container sector average between 60 and 6 then

NOL intended to use about S$700m  for investments and working capital, the remainder to repay debt.

So NOL was in a good position to buy ships at bargain prices from highly leveraged shippers in distress, and shipyards. And increasingly its gearing again in the process.

Imagine going into the next cycle with cheaply acquired ships and a gearing of 45%. Wow Bam. This didn’t happen. NOL is one of the most conservative container lines and took a higher proportion of its ships out of service than other lines to tackle over-capacity.

Moral of story –.

And one hopes it doesn’t try to fly by buying ships in a rising market.

There are the Greeks and Chinese buccaneers out there too on the prowl for ships. The only problem is they are geared above the safety lines on the sides of their ships. But in a rising market, they can borrow more. And a rising market means ship-owners and shipyards will be reluctant to sell.

(Writer has some NOL shares in his CPF portfolio.)

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