Stanislav Oleynikov

Fresh Valuations of Dry Bulk Shipping Companies

Mark Anthony:

I used the same assumption, calculating fleet values of all the companies, listed in the article. If EXM is undervalued, as you beleive, than other stocks must be even more overvalued.
Book values are meaningless, as they are not marked to market. The true value of a 2005 capesize vessel is same, no matter if was bought for $150 mln. in 2008 or for $60 mln in 2005. In 2009, we are close to $60 mln., agian.

I would be happy to discuss valuations of any particular type of ships. Current values in the second hand market of dry bulk vessels are the result of expected DCF based on current view on long-term sustainable freight rates. They are close to 2006 and are higher than in 2003. Distressed sales hasn't hit the market yet. Particulary all owners around the world got waivers on their loans. However, they are expected to appear next year, driving the market lower.

So, shipowners in good financial position, like DSX are going to benefit. EXM has the worst financial situation among all US listed shippers. According to the waiver deal, EXM has to divert all the generated excess cash flow toward early repayment of the debt.

Fresh Valuations of Dry Bulk Shipping Companies

Windsun33:

From the last DEF 14A filling:

Shares Beneficially Owned (1)
Name Number Percentage
Sophocles N. Zoullas (2) 569,676 1.2%
Joseph M. Cianciolo (3) 72,230 *
David B. Hiley (4) 67,896 *
Douglas P. Haensel (5) 66,230 *
Alan S. Ginsberg (6) 95,515 *
Alexis P. Zoullas (7) 21,667 *
Jon Tomasson (8) 66,230 *
Forrest E. Wylie (9) 66,230 *
Directors and Executive Officers as
a group (8 persons) 1,025,674 2.2%

So, insiders own just 2.2%

Fresh Valuations of Dry Bulk Shipping Companies

To Anthony:

Here's a link to ship by ship calculation of market fleet value for EXM:
seekingalpha.com/insta...

If you don't agree with anything in the EXM ship by ship valuation, I can explain every number and show recent comparable deals in second hand market.

The main reasons for similar fleet market values for EXM and EGLE:

1. Fleet values include ordered, but not yet delivered newbuildings. EGLE has a lot of them. Net debt is increased for the remaining payments for these newbuldings.
2.EXM has 7 vessels in the fleet which are not owned, but leased and at a rate above current market.

Fresh Valuations of Dry Bulk Shipping Companies

To Alan Young,

In my opinion, the company is worth as much as the market values its assets. At the moment, anyone with sufficient capital can form a company, buy some dry bulk ships and make an IPO that would result in ownership of stock valued several times higher than initial investment if this new company is valued in line with EXM.
It just takes some time. In 2007 and first half of 2008, such discrepancy lead to numerous IPOs of bulkers. Such companies, like SBLK, SB, PRGN, NMM and infamous DWT appeared exactly this way. If the discrepancy between the NAV and the market price of public dry bulk shipping companies stays for the next several months, such new companies will emerge again, pulling available capital away from existing stocks.

Fresh Valuations of Dry Bulk Shipping Companies

To John Cordes:

China has been importing record volumes of iron ore for the last four months. Based on already made fixtures, this trend is going to continue for the next couple of months. A lion's share of these imports came from traders hoarding ore in anticipation of higher prices. The amount of imported iron ore significantly exceeds demand from Chinese steel mills even running at full capacity. Such situation is not sustainable. Iron ore stockplies are at all time high at the moment and going to increase. Chinese government has already started to implement measures to curb speculative hoarding. Besides, as shipping rates increase, such operations become less attractive to traders.
As a result I believe iron ore shippings to China are going to decrease in not so distant future.
However, the rest of the world may start to restock iron ore supplies, as was stated in today's report of Omar Notka of Dahlman Rose, upgrading dry bulk shippers. However, I beleive that this amount is just a fraction of Chinese imports and is not going to have any significant impact on shipping rates.

Genco Shipping: A New Bubble in the Making?

To nutflush:

You should've studied more carefully presented data. Cash and short-term assets were of course taken into consideration.

Genco Shipping: A New Bubble in the Making?

To bsharvy:

5-year PEG is laughable because earnings are going to decline significantly for the next several years.

My calculation of NAV does include cash flow since the last statement. It is included in the valuation of vessels and charters.

Only deposits on vessels are in the balance sheet. The remaining payments will increase liabilities, of course.

Genco Shipping: A New Bubble in the Making?

Lacerta sale was reported in a number of industry sources. For example, in BRS:

www.brs-paris.com/mark...

It will probably be reported by DRYS later.

Genco Shipping: A New Bubble in the Making?

To Tallulah:

1) The discussion of shipyards going under is mostly concentrated around emerging greenfield shipyards. Established shipyards have an extensive backlog are not expected to have financial difficulties in the near future. Besides, South Korea, the largest shipbuilder in the world has a bailout package for shipyard industry. New emerging shipyards, account for no more than 30% of orderbook for 2010 and not a material number of 2009 deliveries.

2) The number of deals in S&P market went down and it is quite natural at the beginning of downturn in a cyclical industry. If current situation is not a classical example of the end of a cycle in shipping industry, when rates are at a multiyear low and orderbook is at a multiyear high, than I it is hard to imagine how it could be.

3) I have to admit that I don’t have exat figures regarding scrapping capacity. However, some sources I read regarding India and Bangladesh suggest that it will be hard to imagine recycling 500 ships in 2009. It this happens, however, it won’t be good for drybulk shipping market anyway.

4) Genco didn’t order these ships from the shipyard. It was a resale from a Turkish owner. Genco just cancelled the deal, but the vessels will be delivered from the shipyard anyway.

Genco Shipping: A New Bubble in the Making?

Also, market values of vessels, which are used as collateral, are usually determined by reports of shipbrokers. Their current estimations are somewhat lower than those, presented in the table.

Genco Shipping: A New Bubble in the Making?

To Tim Plaehn:

The question is, whether China revival will be sufficient to emply drybulk all the drybulk ships. I didn't expect that China growth will be sufficient even during the boom. The vast majority of ships in the orderbook for 2009 will delivered and 2010 is not going to fall far behind even after all cancellations.

Of course, GNK cashflow in 2009 is probably going to be sufficient to pay dividends (if charter contracts will be honored), however I don't think than is going to pay any dividends for the foreseeable future. It is clearly in violation of loan covenants and a typical deal with lenders in such cases invovle restrictions on paying dividends. Have a look at EGLE and OCNF.

Genco Shipping: A New Bubble in the Making?

To bsharvy:

P/E ratio makes sense if earnings are sustainable. If gains are on-time by nature, it is not logical to apply any multiple. Charter rates, that were singed during the boom are not sustainable.
Do you really believe in the growth of earnings for next 5 years? It is laughable.

By saying that a drybulk shipping company is just a bunch of ships, I mean that it is just a holding company for some standardized and marketable assets. It has no competitive advantages or any other kind of intangible assets, other than the ability of the management to make investment decisions.

When making calculation of the value of charters and ships, I took into consideration expected cash flow from 9/30/2008. That is why, Q4/2008 earnings are included in valuation. Remaining payments for new vessels are included in the balance sheet.

Genco Shipping: A New Bubble in the Making?

To Tallulah:

1) Do you think shipyards will not lower prices for new orders? As recently as in 2006 they were happy to take orders at prices even lower than estimations. For example, on September 25, 2006 Dryships Inc. announced an order to build 2 panamax drybulk vessels at a first class shipyard at a cost of approximately $33.25 million, each. In 2003, shipyards were taking at even significantly lower rates. Now, shipyard capacity is greatly expanded and steel prices are lower. There have been no new orders in recent months, naturally, but once they will emerge, prices are probably going to be below 2006 level.

2) The number of deals in S&P market is growing and prices are not going higher. Some of the recent deals were reported at significantly lower rates than I presented. Last week, a deal to sell a 12-year-old capesize bulker for $27 mln. was officially confirmed. My model would have produced $42 mln. fair value for this vessel. The point that the selling companies are in distressed situation is not true. Lacerta, for example, was sold by Dryships. A number of vessels were sold by Norden, one of the largest shipping companies in the world.

3) An interesting fixture was reported today. 25-year-old cape was chartered at a profitable $12,000 rate a day for a year. If cape rates reach $30,000, scrapping activity will stall. If they keep at about $20,000 scrapping activity is going be moderate. In case of rates of $10,000 or below, scrapping is going to be significant. However, it is not particularly optimistic scenario for GNK. Besides, scrapping facilities are limited and under no circumstances the number of scrapped dry bulk vessels could exceed the number of newbuilds in 2009.

4) It is just too late to cancel ships for 2009 delivery. Almost all of them will hit the water. Cancellations for 2010 will be significant, but currently are not expected to higher than 50%. Vale recently confirmed its plan to build VLOC fleet of its own.

5) You should have looked more carefully at the table I presented. Genco Hadrian charter is worth $47.5 mln. according to my calculations.

Excel Maritime Carriers: Set Up To Excel

On Jan 09 03:19 PM Ricard wrote:

> How about this:
>
> I've been in tech since 2002, with the hope that it returns to 1/3
> of its 2000 valuation within 10 years - this has easily been true
> of the major tech names, and I have done quite well with this position.
>
>
> With shippers (and in my case EXM), I am looking for something similar
> - 1/3 of its high (around 20) with a 5-10% dividend within 3-5 years.
> That would justify its stock price today. Your thoughts?

In ten years, anything is possible. I just beleive, that given current situation in the dry bulk market, EXM PPS, its NAV and all the risks involved, its clearly a sell. It will be a challange for this company even to survive. I have a bearish opinion regarding dry bulk industry, but in this sector, SBLK and DSX look significantly better. SBLK has manageable debt and above the market charters that signinificantly exceed its market cap. Some of its charterers might default of course, but its really another problem inherent to all bulkers. I beleive most of them will honor obligations. DSX has very little debt, so it at least it's going to survive.
I would buy one of these companies as a long-term investment.

Excel Maritime Carriers: Set Up To Excel

www.brs-paris.com/inde...