Can Societe Generale Ever Be Relevant Again? [View article]
Very good article. The cash dividend cut, strong/tradiotional shareholder base and French establishment and central bank support are also relevant factors. I also had turbo warrants base 14 bought when GLE was at 16 eur during the summer in a very profitable trade.
I agree that any further upside will be linked to the perception that the "crisis" is over. I also think that the comment above as to the politically-driven GLE investments abroad is spot-on.
A very similar article can be written for ING. Euro insurance companies hit by sovereign debt concerns - ageas, aegon, allianz - were also good investments.
Navios Acquisition: Unwinding The Spin [View article]
Due to related parties cont'd, as at: - Q1 2012: $55.3m - Q2 2012: $71.0m - Q3 2012: $79.9m +$30m loan = 2xannual operating cashflow.
The disconnect between recent product tanker rates and NNA's share price could be attributed to the certainty of covenant breaches under all credit facilities as the leverage test (not the one shown in the presentations) is reaching 95-100% (no equity).
Waivers will be granted, perhaps at a price. It is more than logical for NM to convert the intercompany loan and receivables into equity to give NNA some breathing room.
In the meantime, Scorpio has started conference calls that sound more than fireside chats (one hour or more of Q&A). It has now a cult following among basically all analysts and PE shops who can't wait to gobble up successive secondaries which are seen not as dilutive but as votes of confidence - even if the product tanker sector supply is increasing precipitously once more.
Safe Bulkers: Would Low Valuation Lead To A Management Buyout? [View article]
Hi Lambros - I'd like to add that you should add another $384m i.e. the 2007 dividend to the Hajioannou pre-IPO/IPO cashpile - so a total of $740m - the company had negative equity when it IPOed. This and the hefty dividend means that there was no point in skimming the company through inflated management fees, travel agencies and other bizarre transactions.
I think one capesize is chartered to Eastern Power, a Tata subsidiary (see F-1) and the other may be to Arcelor Mittal (based on client list and various conference calls where they spoke about capes chartered to Indians).
I don't see a buyout. A listed vehicle is the goose laying the golden eggs. If the cycle turns, a listed company with good assets can raise fresh money all the time and pay dividend to the major shareholder. If the cycle stays really low there will be better opportunities to recapitalize the company and retain control at lower prices - and the banks will always welcome an equity line to finance debt repayment. Angelicoussis may wish he were listed right now.
The decision to cut the dividend, even if late and even if not the cut was not a total one, shows that they want to stay in the market. Besides the Koulitsa, I think they bought a second vessel from client K-line, the Freia. I fully agree with your last paragraph even if not with the last sentence.
Personally I dislike the company model with high leverage and capex commitments AND high or full dividend payout because it means that a series of secondary offerings are coming. On the other hand history shows that jumping in early into a Fredriksen scheme in a sweetspot sector can be very rewarding.
For more long-term investments both Rowan and Maersk are expanding into high-end deepwater, anchored on their Norwegian jack-up presence - dominance. Both have lower finance costs and/or better capital structure (Maersk Drilling is of course part of a conglomerate and financed centrally) than NADL and investors seeking exposure to the high-barrier Norwegian market+deepwater can take a look also at them.
To be honest, I was surprised to read about a "water bar" - never seen it in a number of households in the Benelux, UK, Germany or France. Southern Europe (except northern Italy) doesn't even drink carbonated water in the first place. Now, purifying water has caught on in a number of countries - Brita is a well-known brand.
Perhaps this is a corroboration to your thesis that there are many markets unexplored but I am known to be averse to kitchen-top gadgets and the Aqua Bar looks very bulky so I'm not the right person to ask.
Overseas Shipholding Group Inc. - Why The Equity Is Worthless, Part II [View article]
The stock had been a traders dream: long and short within a very wide range. I am not a trader myself but it is true that I had a number of positions from time to time, eventually with a net loss, not because I thought the company was well-run but because I thought the banks would chicken out.
I thought I was contributing to your calculations but you are choosing a different way to argue, which is quite distasteful. It is true that I don't know when you initiated your position but it is reasonable to assume that it was fairly recently. Most people that shorted in the 20s don't write articles about a penny stock. In my view your response is haughty and verging on the hypocritical: "commenters to disclose positions?" Geddatahere.
They were in litigation is Sweden against a company doing exactly that. I don't know if SODA received a final judgment yet.
Like many homes in Western/Northern Europe we do have a Sodastream (in fact for some three years now) but only for carbonating tap water - I don't drink sodas as in soft drinks. I recommend it to everyone - you should get one Jeremy. Would I bother getting a new machine? No. Would I bother getting a cheaper cylinder? Probably yes, even if the $16 euro equivalent is comparatively very cheap anyway compared to bottled source (or not) carbonated water.
Overseas Shipholding Group Inc. - Why The Equity Is Worthless, Part II [View article]
Hi - very respectable that your revised your thesis. But you're trying too hard and you're off the mark again. The charter-in obligations are indeed onerous, but they are not crystallized not balloon debt payments. Any obligation is the difference between charter-in rate and the market rate or other charter-out rate that OSG earns, spread over the next few years. In fact, OSG's cash burn will now be solely due to certain MR charter-ins and nothing else (except Q3, where all the international crude and clean fleet may have lost cash). Half of the charter-ins relate to the U.S Flag fleet, which is profitable, and the international MR market is improving, with a huge spike in the Caribs in Q4.
So you need to rethink your tables again. You can wait a couple of weeks to see the company's statement of assets and liabilities in bankruptcy court, can't you.
It's not that OSG needs to come out of Ch11 any time soon anyway. They do have some valuable businesses and they could convince any judge that the rates may turn - a couple of completely worthless tanker companies, Omega and Marco Polo, have been fighting creditors for more years in U.S. courts - it is unimaginable that OSG will not get a break if the mysterious tax issue (????) is resolved. Even Torm's shareholders kept 10% of the company (even if probably not for long).
This is not a defense of the company; rather, an observation that you are short a bit too late.
Overseas Shipholding Group Inc.: A Guaranteed Zero For Equity Holders [View article]
Look, I'm not going to argue for or against this and as I said you make a valid case for the equity being worthless. But trying to say with a straight face that you ignore $343m of assets on the balance sheet (all other things being equal), information on which is included in the 8-K you reviewed, while taking into account the related liability, undermines the quality of the rest of your arguments.
Overseas Shipholding Group Inc.: A Guaranteed Zero For Equity Holders [View article]
Hi - interesting article. But shouldn't you add to the cash the $343m that OSG drew on their $1.5b after the end of the Q2? As you see the loan is almost all drawn down at CHh11 but not at Q2. So you don't make an "accurate review" of both assets and liabilities same pont of time. This makes your equity calculation jump to an embarrasingly high +$100m and I think you should adjust your article, focusing more on the thoughts after that table.
I'm not a proponent of the company but I would think that the debt is not the main issue. The charter-in obligations were bleeding the company and the unidentified tax issue is what kills the bonds. Subject to the tax issue, personally I think the equity does have some value, which, of course, is impossible to calculate.
Safe Refuge In A Shipping Portfolio [View article]
At last SB drastically reduced the dividend, saving some $30m annually. A very good and sensible decision which should have been taken at least a couple of quarters ago.
The low share price makes further equity raises to pay dividend unlikely. The company is picking up vessels from its own clients (Koulitsa from K-line). The charters hold for now. A good entry point today, at least worth the risk.
Undercapitalized European Banks And Basel III [View instapost]
Many good thoughts. I think you should net out derivatives from balance sheets (some $1.2b for DB, etc) which brings down the leverage. But there is no doubt that European banks have committed to reducing balance sheet and increase equity - by derisking, retaining earnings and cutting dividends. In fact they have made good progress on that. All of them did raise capital a number of times in the process.
But on credit supply, I don't see that as a negative. European banks followed others in global - not necessarily European - credit expansion and helped fuel bubbles in many capital intensive and/or speculative sectors, from real estate to insurance capital to shipping. They now sell off their international books and operations and "refocus" in Europe or traditional banking operations.
You already talked about deflation of the non-banking finance sector and this article is in the same line. But why not? If the bubbles where fuelled by easy, engineered, credit, everyone should accept that the much-vaunted economic growth will not come so easy any more.
As I've been doing in a number of articles on GASS, I addressed mainly the statement that the CEO is not aligned with the interests of his shareholders. This seems to be incorrect both in relative (compared to peers) and absolute terms.
I don't think operational cash flow is free cash flow. First, depreciation is a real cost that should not be ignored. Second, GASS has high debt repayment obligations and covenants to comply with. Buybacks reduce equity and the relevant ratios. The value of its product and aframax tankers has plunged and there is a number of old LPGs in the fleet that may stop producing adequate returns in the future. As Sava said above, this is not a mortgage fund where NAV can be easily realized.
I like buybacks too. Many capital intensive companies are trading below NAV (I like an aircraft lessor, AER and I couldn't understand last year why they wouldn't buy shares back, in an article similar to yours). I'm just saying that you should not be so categorical against the expansion and management. It's not that the share is still at $4.
I have become a fan of Harry and his company, and an investor since summer. He is the only CEO/owner in the general shipping sector who has frozen compensation and eliminated bonuses to himself, frozen or reduced management fees to himself, supports with his own cashflow the mistimed purchases of the MR tankers (see charter of Alpine Endurance) and prudently repurchases shares from time to time. The newbuildings are very high spec and the price is the one his private company ordered them for. In short, even if I'm sure he holds the same opinion about U.S. investors as most Greek shipowners (not a flattering one) and he is hilariously rude in the CCs, he treats them fairly.
I also liked the buybacks by the way and much prefer them over dividends. But he was explicit in the Q2 CC that the company enters a second phase of expansion. Interest rates are low and shipyards are hungry. The small LPG sector seems very steady. Harry is young, ambitious and wants to start a legacy. And I'm not sure Buffett ever paid a dividend and only after having built his empire he did some buybacks.
Property & casualty insurers could see earnings fall by an average of 26% after Hurricane Sandy, Morgan Stanley says, cutting estimates by more than 40% each for Allstate (ALL), Chubb (CB) and Travelers (TRV); ACE and AIG also could take a hit. The firm's favorite P&C broker is Marsh & McLennan (MMC), which it says offers 15%-plus EPS growth and a ~3% dividend yield at an attractive valuation. [View news story]
MS: "We note there is little cushion left for future 4Q cat losses with 2 months remaining."
At the same time quality P&C insurers and basically all Bermuda reinsurers have been reporting excellent earnings this year because of sustained increased pricing and the benign cat year. But alas the focus of MS is on quarterly performance.
Can Societe Generale Ever Be Relevant Again? [View article]
I agree that any further upside will be linked to the perception that the "crisis" is over. I also think that the comment above as to the politically-driven GLE investments abroad is spot-on.
A very similar article can be written for ING. Euro insurance companies hit by sovereign debt concerns - ageas, aegon, allianz - were also good investments.
Navios Acquisition: Unwinding The Spin [View article]
- Q1 2012: $55.3m
- Q2 2012: $71.0m
- Q3 2012: $79.9m +$30m loan = 2xannual operating cashflow.
The disconnect between recent product tanker rates and NNA's share price could be attributed to the certainty of covenant breaches under all credit facilities as the leverage test (not the one shown in the presentations) is reaching 95-100% (no equity).
Waivers will be granted, perhaps at a price. It is more than logical for NM to convert the intercompany loan and receivables into equity to give NNA some breathing room.
In the meantime, Scorpio has started conference calls that sound more than fireside chats (one hour or more of Q&A). It has now a cult following among basically all analysts and PE shops who can't wait to gobble up successive secondaries which are seen not as dilutive but as votes of confidence - even if the product tanker sector supply is increasing precipitously once more.
Safe Bulkers: Would Low Valuation Lead To A Management Buyout? [View article]
I think one capesize is chartered to Eastern Power, a Tata subsidiary (see F-1) and the other may be to Arcelor Mittal (based on client list and various conference calls where they spoke about capes chartered to Indians).
I don't see a buyout. A listed vehicle is the goose laying the golden eggs. If the cycle turns, a listed company with good assets can raise fresh money all the time and pay dividend to the major shareholder. If the cycle stays really low there will be better opportunities to recapitalize the company and retain control at lower prices - and the banks will always welcome an equity line to finance debt repayment. Angelicoussis may wish he were listed right now.
The decision to cut the dividend, even if late and even if not the cut was not a total one, shows that they want to stay in the market. Besides the Koulitsa, I think they bought a second vessel from client K-line, the Freia. I fully agree with your last paragraph even if not with the last sentence.
North Atlantic Drilling: Cheapest Offshore Driller With A Huge 9% Yield [View article]
Personally I dislike the company model with high leverage and capex commitments AND high or full dividend payout because it means that a series of secondary offerings are coming. On the other hand history shows that jumping in early into a Fredriksen scheme in a sweetspot sector can be very rewarding.
For more long-term investments both Rowan and Maersk are expanding into high-end deepwater, anchored on their Norwegian jack-up presence - dominance. Both have lower finance costs and/or better capital structure (Maersk Drilling is of course part of a conglomerate and financed centrally) than NADL and investors seeking exposure to the high-barrier Norwegian market+deepwater can take a look also at them.
Talking Soda [View article]
Perhaps this is a corroboration to your thesis that there are many markets unexplored but I am known to be averse to kitchen-top gadgets and the Aqua Bar looks very bulky so I'm not the right person to ask.
Overseas Shipholding Group Inc. - Why The Equity Is Worthless, Part II [View article]
I thought I was contributing to your calculations but you are choosing a different way to argue, which is quite distasteful. It is true that I don't know when you initiated your position but it is reasonable to assume that it was fairly recently. Most people that shorted in the 20s don't write articles about a penny stock. In my view your response is haughty and verging on the hypocritical: "commenters to disclose positions?" Geddatahere.
Talking Soda [View article]
Like many homes in Western/Northern Europe we do have a Sodastream (in fact for some three years now) but only for carbonating tap water - I don't drink sodas as in soft drinks. I recommend it to everyone - you should get one Jeremy. Would I bother getting a new machine? No. Would I bother getting a cheaper cylinder? Probably yes, even if the $16 euro equivalent is comparatively very cheap anyway compared to bottled source (or not) carbonated water.
Overseas Shipholding Group Inc. - Why The Equity Is Worthless, Part II [View article]
So you need to rethink your tables again. You can wait a couple of weeks to see the company's statement of assets and liabilities in bankruptcy court, can't you.
It's not that OSG needs to come out of Ch11 any time soon anyway. They do have some valuable businesses and they could convince any judge that the rates may turn - a couple of completely worthless tanker companies, Omega and Marco Polo, have been fighting creditors for more years in U.S. courts - it is unimaginable that OSG will not get a break if the mysterious tax issue (????) is resolved. Even Torm's shareholders kept 10% of the company (even if probably not for long).
This is not a defense of the company; rather, an observation that you are short a bit too late.
Overseas Shipholding Group Inc.: A Guaranteed Zero For Equity Holders [View article]
Overseas Shipholding Group Inc.: A Guaranteed Zero For Equity Holders [View article]
I'm not a proponent of the company but I would think that the debt is not the main issue. The charter-in obligations were bleeding the company and the unidentified tax issue is what kills the bonds. Subject to the tax issue, personally I think the equity does have some value, which, of course, is impossible to calculate.
Safe Refuge In A Shipping Portfolio [View article]
The low share price makes further equity raises to pay dividend unlikely. The company is picking up vessels from its own clients (Koulitsa from K-line). The charters hold for now. A good entry point today, at least worth the risk.
Undercapitalized European Banks And Basel III [View instapost]
But on credit supply, I don't see that as a negative. European banks followed others in global - not necessarily European - credit expansion and helped fuel bubbles in many capital intensive and/or speculative sectors, from real estate to insurance capital to shipping. They now sell off their international books and operations and "refocus" in Europe or traditional banking operations.
You already talked about deflation of the non-banking finance sector and this article is in the same line. But why not? If the bubbles where fuelled by easy, engineered, credit, everyone should accept that the much-vaunted economic growth will not come so easy any more.
StealthGas: Hungry For A Buyback [View article]
I don't think operational cash flow is free cash flow. First, depreciation is a real cost that should not be ignored. Second, GASS has high debt repayment obligations and covenants to comply with. Buybacks reduce equity and the relevant ratios. The value of its product and aframax tankers has plunged and there is a number of old LPGs in the fleet that may stop producing adequate returns in the future. As Sava said above, this is not a mortgage fund where NAV can be easily realized.
I like buybacks too. Many capital intensive companies are trading below NAV (I like an aircraft lessor, AER and I couldn't understand last year why they wouldn't buy shares back, in an article similar to yours). I'm just saying that you should not be so categorical against the expansion and management. It's not that the share is still at $4.
StealthGas: Hungry For A Buyback [View article]
I also liked the buybacks by the way and much prefer them over dividends. But he was explicit in the Q2 CC that the company enters a second phase of expansion. Interest rates are low and shipyards are hungry. The small LPG sector seems very steady. Harry is young, ambitious and wants to start a legacy. And I'm not sure Buffett ever paid a dividend and only after having built his empire he did some buybacks.
Property & casualty insurers could see earnings fall by an average of 26% after Hurricane Sandy, Morgan Stanley says, cutting estimates by more than 40% each for Allstate (ALL), Chubb (CB) and Travelers (TRV); ACE and AIG also could take a hit. The firm's favorite P&C broker is Marsh & McLennan (MMC), which it says offers 15%-plus EPS growth and a ~3% dividend yield at an attractive valuation. [View news story]
At the same time quality P&C insurers and basically all Bermuda reinsurers have been reporting excellent earnings this year because of sustained increased pricing and the benign cat year. But alas the focus of MS is on quarterly performance.