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  • What Does Frontline's Share Price Tell Us? [View article]
    No. The only way that could happen is via a war in the Middle East, and one that does so much damage that Hormuz is shut down for months.

    The reason to own FRO equity is for direct exposure, i.e. cash earnings power, to VLCC and Suezmax spot rates. These fluctuate, a lot. But, over time and when deliveries slow, the spot price will fluctuate from a higher base line as the market becomes balanced (no longer too many ships).

    We may see this in 2014-2015, and thus $10/share. It could spike in between, no way to predict. That would be a 30% per year return from here. $20 would require 50k per day in TCE for an extended period. We a few years away from that, on a fundamental basis.
    Jul 15 04:11 PM | 1 Like Like |Link to Comment
  • What Does Frontline's Share Price Tell Us? [View article]
    Would advise to become much more familiar with the tanker market before making these statements. Let me a clear a few things up. First, FRO has virtually no debt and it owns no vessels other than the ITCs. The FRO fleet is chartered in from SFL, and as such is a LEASE, which can be terminated. That is not the same thing as having to pay back a bank loan.

    Second, if you think you are going to make money by shorting JF's first born, you are taking on risk that borders on insanity. Do you think he and Tor are just going to walk away from 33 million shares? Of course not. FRO is generating cash, and will continue to do so in any decent rate environment. JF and Tor are simply waiting out the worst part of the cycle. If FRO needs more, they will take care of it. Tor told you that in Oslo last year things will be bad for several years. None of us know what exactly they will do, nor when, but it will be positive. FRO has, and will have, cash it needs to ride the cycle out.

    Now for DHT. Are you serious? These two companies are not even close to being in the same league. That maneuver on the equity raise was just nuts and cut the stock in half. Did you read the presentation they sent around. And then telling everyone that this will mean a much higher price. Talk about forward looking statements. Have you looked at DHT's insane poison pill features? This company could issue shares at the stroke of a pen with no approvals needed from the board. So, look at the raw deal you got as a shareholder. Nice.
    Have you calculated what the dilution was to get this money from the boys in Boston? Tell me, what is the strategy at DHT? MGMT hanging on for dear life, that's what.

    What matters is what you have trade with when the rates turn up and what resources you have to stay be in business when the time comes. DHT is at the mercy of the distressed equity sharks. And let me suggest another thing, take a look at the percentage of companies that did a reverse split and ended up with a higher market cap later. You will be surprised. Clear and present danger signal.

    A little history on how much rates matter. Rates are everyhting. Recall a couple of years ago when Golar was a 4 dollar stock and everyone called it a dog and the LNG rates were terrible. Now rates are sky high and Golar is at 38. There has been virtually no new contracting for VLCCs in the past 18 months, a 40 year low. That means, except for a bit of slippage, there will be a dearth of deliveries n 2014. You will have your worst nightmare if you are short FRO.

    Forget all this NAV nonsense. Vessel values can go up 5x in a hurry if we have a sustained supply squeeze which WILL happen. And that is 2 years away. So, that is all that is going on here, nothing more. JF is simply biding time.

    To get up to speed on how our business really works, suggest you order Maritime Economics, by Martin Stopford. Mandatory reading. And to understand FRO, you need to understand JF. Reading up on Hilmar Reksten will give you some insight there.

    Good luck with your FRO short, but my advice is that you cover it and soon.
    Jul 13 01:33 AM | 2 Likes Like |Link to Comment
  • Frontline Restructuring: Breaking Even In The Oil Tanker Industry [View article]
    I should think in this environment, and having made a $500mm commitment, prudence may be in order at Hemen. SFL, FRO, GOGL, MHG, Deep Sea etc, save SDRL and the LNG assets, have taken fairly big hits and are leveraged.

    Should the market get some positive surprises, which it does not expect, then the beaten down assets will recover to such a degree that the extra given "back" on FRO12 is not significant.
    Dec 20 04:41 PM | 2 Likes Like |Link to Comment
  • Box Ships: High Yield With Instant Two-Bagger Potential [View article]
    Dear J,

    Excellent thoughts, I will study TEU a bit more. But I would like to point out that you are seriously mistaken with your comment about DCIX. Please consider doing a similar amount of digging deep.

    First, you say DCIX has failed to perform? How can you say that when the company has not even started yet? 3 of the 5 vessels in the DCIX fleet were not delivered to the company until the last few days of Q2. As you surely know, there are start up and provisioning expenses that occur in advance and these were booked in Q2, but no income from these three ships. Obviously the results will "look" poor. However, in this coming quarter, full income will be recognized. Average daily vessel expenses are in the 9k/day range, perhaps a bit lower now that bunker has dropped. Average daily income is around 22k/day. The vessels are chartered to Maersk, a high quality credit, into 2013. The company has no debt and close to 50% of its market capitalization in cash!

    The payout policy is 70%. The vessels are the right size, management is simply once of the best, perhaps the best, out of the Greek shippers. No speculation and no raising the larder.

    You may easily have company in "2 bagger" land, and a very attractive dividend stream at today's prices. When investors wake up from their Euro induced stupor and actually SEE the earnings and dividend, it will be too late.

    Sep 30 01:08 PM | Likes Like |Link to Comment
  • Frontline's Idealistic Proposals Will Not Save the Day [View article]
    STNG good value here. Product market tighter than people think. Cash flow will be strong post deliveries IF we have decent demand levels. However, it will not be possible to time entries. The shares trade thin. If GNK can get lifted 100% because of a decent rate move and one institutional buyer in a week, STNG will lift on much lower volume. STNG is an investment, not a trade, and the price available today is a substantial discount to PV of projected cashflows under almost any economic scenario. I own some.

    N.B.: Wilbur Ross and Stevenson paid more for their assets than what you get with STNG stock today.
    Sep 27 03:46 AM | Likes Like |Link to Comment
  • Frontline's Idealistic Proposals Will Not Save the Day [View article]
    Correct. Need only compare GASS and GLNG.
    Sep 27 03:34 AM | Likes Like |Link to Comment
  • Frontline's Idealistic Proposals Will Not Save the Day [View article]
    Dear Clemens,

    the video is hilarious!
    Sep 27 03:32 AM | Likes Like |Link to Comment
  • Risk Premium Factor Model Shows S&P Undervalued By More Than 20% [View article]

    Please explain the Jan 09 spread, (which is a replica of the current spread, other than the current spread is even more extreme), to the present situation.

    Given that reported earnings trail events, and given that the summer was a disaster for business and guidance 'hopeful" at best, would you not say that the chances of the predicted value coming down hard are quite good?

    It doesn't take a severe recession to bring S&P earnings down a lot from their super-elevated, based on cost cutting and no hiring heights, aided by exports.

    Equity prices are based on the discounted value of expected future cash-flows and those expectations are heavily influenced by confidence in the probability of their future improvement.

    Therefore, would you not agree that there is a no. 4 in your scenarios, which is that predictive values fall precipitously, and catch up to a falling equity market, where both reach equilibrium, at a much lower point?
    Sep 18 02:34 PM | 2 Likes Like |Link to Comment
  • Diana Containerships (DCIX -5%) reported a smaller Q2 loss this morning on solid Y/Y gains in revenue, but missed Street expectations on reduced demand, higher maintenance expenses and increased fuel costs.  [View news story]
    I'm sorry but the above has got to take top honors for stupid reporting. How can there be reduced demand if all 5 vessels are employed well into 2012-2013?

    Missed the Street expectations of higher maintenance expenses? How stupid is that? They took delivery of vessels mid-quarter. Hoe can you have higher maintenance expenses affect earnings when there were fewer assets to maintain?

    The higher expenses are start-up expenses which are always higher when deploying additional ships, especially mid-quarter when the expenses count but the charter revenues are not enough to offset the timing! There was no miss at all.

    Finally, the charter income of the 5 vessels is 100% higher than the vessel daily operating expense across the ships.

    So, why is this company selling at 50% of liquidation value and 2x cash in the bank? And ZERO debt?

    This is what I call stupid. When was the last time you got to buy a dollar bill for 55 cents?

    Aug 10 03:19 PM | Likes Like |Link to Comment
  • Frontline Floundering as Rates Sink [View article]
    Dear hcstorey,

    I couldn't agree more on the trailing PE b.s., but I think you are overconfident on the orderbook being financed. I do not think so. The outstanding financing requirement is well over 300 Billion, that number is higher than the market cap of the top 25 shipping banks combined. There is no bank equity to support the financing needed. 50% of the bulk book simply will not deliver. The Chinese government is not going to supply the difference for any number of reasons. Yes, there is structural "capacity" in the yards, and pressure on nb prices will continue.

    EVERYONE has this baked in - The orderbook will be financed. It will not, and that is the surprise coming. This will take catch people off-guard. You cannot compare this to past times. We did not have the banking insolvency we have today.

    You are more likely to see here what happened in the container market three years ago. The projected asset markdown may happen, but if so, it will likely be short term. I do not think the deals will be there because the banks will not force fire sales. They cannot. And, there is no incentive to shift loan book assets from one sink-hole into another. The banks will not mark these to market, they will ride these assets to demo.

    You act in a different market. Of course there will be "one-off" picks and I am well aware of this. But that has nothing to do with FRO for example. This company will be used by equity to mop up, the question is when does capital decided they don't want to miss it. And we are in the range. The equity is already being bought by some very astute friends. I don't care if it goes lower by another 20%, so what.

    If we have a long term demand collapse, all bets are off. But I do not see that, even though that is what is driving the macros.

    We'll see. Maybe Vale will sell you one of their giants.

    There will be some serious money making opportunities in equities (different from your business), just like Golaar/BP years ago.
    Aug 1 11:54 AM | Likes Like |Link to Comment
  • Frontline Floundering as Rates Sink [View article]
    Most impressive. Kindly enlighten me as to the market share of Gdansk yards in global shipbuilding.

    Please cite your source for tonne-mile demand decline of 50% in the last 18 months. Please specify the routes on which this decline occurred. My log indicates WA-E alone up 73% y/y.

    Counterparty risk? Obviously for those who cannot get a solid credit to hire them. Makes the offer useless, doesn't it.

    You cannot link a vessel price loaded with a 5 year T/C and apply it to second hand values across the board. Apples and Oranges.

    As part of your analysis of our industry, you might consider that $320 billion of the total orderbook has yet to be financed. Perhaps you might enlighten me as to where that financing is coming from? Perhaps the Chinese government to complete the oderbook for free? Or maybe the Kremlin will chip in? Not D.C., that's for sure. The orderbook is soft, really soft.

    As a last suggestion, if you run NPV's at least three years past the delivery tail of the tanker orderbook you will see a positive number even at ridiculous discount rates. What you cannot know is when the market for equities of the leaders (FRO) decides to discount that and lift values of the equity despite intermediate term bad rates.

    No one knows how demand will play out. However, what we know, and you know as well, is that in oversupplied markets the best ships with the best managers get hired by the top credits (assuming they make their assets available) and everyone else fights for scraps, takes risks, and gets killed. That is why Frontline will be there and the amateurs and hobby operators will not - if it gets really tough. Securities markets are not the shipping markets and they act way in advance. I don't care if I have to wait for 5 years. I like the of the security now. Others may want to wait until $20 to confirm that it has gone up. The early bird gets the worm.

    Not everyone on this board is an idiot.

    Cheers and a pleasant weekend.
    Jul 29 05:42 PM | 1 Like Like |Link to Comment
  • Frontline Floundering as Rates Sink [View article]
    Some thoughts about a variety of comments on this thread, an interesting range of opinions were expressed.

    1) "fry other fish" - this is precisely the once in a generation cyclical bear market that future great returns are made of. It is only a question of which fish. FRO is a prize.

    2) Japan has very little market share in shipbuilding. The Chinese have expanded the most followed by Koreans. Yard capacity is at best tangentally related to rates and if you were to run a regression analysis you would not get a positive t-score relating that to ship-owner margins.

    3) It will take 5% of world GDP to soak up the growth in supply. This is nonsense. Ton-mile demand is what matters on the commodity side and TEU demand on the liner side. LNG demand is entirely a function of liquefaction demand (LNG is a small market) based on a numerous factors in the natural gas/oil energy equation. Example, trade between India and China is expected to increase to 100 Billion by 2015. That implies a 25% growth rate in trade which will provide a similar increase for shipping on that particular route. Add in port congestion which has a dramatic impact on vessel availability and you could easily see sustained rate increases - and all that can happen with world GDP at 1%. If World GDP actually grew at 5%, the impact of ton mile demand from current level would be exponentially higher. GDP matters, but it is not a direct relationship.

    3) the 1970's-early 1980's. Chart lookers frequently bring this up as a cycle to refer to. Again, this is non-sense and rear-view mirror analysis. - it best serves as an illustration of another cycle. The ratio of VLCCs to global oil consumption in 1975 was 650/55 million barrels. Today the ratio is 570/90 million barrels. Then there was no China, India, Brazil etc, etc. Things change. Even if the current order book gets to 700 on the water, it will be nowhere near the excess of the 1970s.

    4) it is a mistake to think the Chinese yards do not have to be profitable. They do. Capitalism is alive and well in China. It is the drive by owners to order that got them in the business. Just because the industry is supported in "the plan", does not mean it is an endless subsidy. Count all the yards that have gone out of business. China is not going to take over the shipping business which will remain in the hands of the Vikings, Phoenicians (Greeks) and Hanseats as it has been for millennia. China supplies Apple, Rimm, Motorola and Nokia in thousands of factories. Do they own the smartphone business?

    The far bigger issue with the yards in China is exactly the opposite: As you know, the container manufacturing business was taken over by Chinese companies over the past decades, now centered around Nantong. What happened after 2008 when trade collapsed and the liner market crashed ? Container manufacturing slowed dramatically to the point where there was such a shortage that the price in 2010 was 3x higher than in the fall of 2008. Just have a look at the stock of Textainer. If Chinese yards STOP building, new ships costs will go through the roof and this is easily possible,and would already be happening if it were not for the LNG and container orders. If I were Chinese, I might give that some serious thought.

    5) private equity "ruining" the market. Let them. Let's see what happens to these businesses. There is no difference between them and private Greek money doing the same thing before. Except PE guys are not operators. Good luck. There is no market to be ruined. It's a market and a very free one. That's what is great about it.

    6) VLCC newbuild prices have held firm at $102 million all year. Where does the $75 million number mentioned come from? The Front Shanghai was sold for over $90 million and she was not that new.

    7) "Dead market for a generation" - Really? We know about the orderbook. We know about US gasoline demand y/y down 25%. We know about the collapsed AG/MEG-JAP route. So we have a huge order book against weak demand. Of course rates will nose-dive and investors will scream SELL. Please note that the no. of crude tanker ordered in 2011 is at best 5 if you count the 2 Gulf Navigation options. 5. Have a look at the projected 2013 orderbook. Slippage is big. Conversions are happening, cancellations will happen more the longer this goes on. The storage market has been dead. Governments are interfering with he natural demand/supply equilibrium of oil through political actions and wars.

    If any of this rights itself, you will have balance and even a shortage in 2014 unless new orders start taking off. The tanker fleet is young and so scrapping will not be that important to bring supply down, but demand and a depleted orderbook looking out just two years might very well.

    8) Frontline. The only asset number that matters is NAV. And remains at $15-16/share. And it doesn't matter if they do not intend on selling. What amtters is what the DO with the assets, and that is the management premium that the company has kost because Tor Troim decided to be a comedian. The company has smart management. Something will happen with ICTL and possibly Knightsbridge and who knows what else is being discussed. ICTL is a special case and the company is burdened by the ICTL bond covenants which limit vessel flexibility. This will all be solved in due course. Does anybody really think Hemmen holdings is powerless? Do they need Oaktree?


    This is nasty cycle. It is exacerbated by a once in a lifetime orderbook. We are getting through it. Frontline will come out fine and stronger. When opportunity meets preparation is when the money is made: Is anyone really thinking about fishing for $9/share when NAV is near 16? I'm nor smart enough to time this, and it is not necessary. All that is required is to understand the business to know that between now and 2015 rates for VLCC's will be at 40k for a sustained period of time, and that means a 200% return on FRO from here, and that is 40% per year.

    I will fry this fish, because I know this fish and the sea it swims in. The water is dirty right now, but not forever.

    Jul 27 09:06 PM | 2 Likes Like |Link to Comment
  • Jamie Dimon: Greece Won't Default [View article]
    Mr. Dimon is correct. Greece will not default. By definition, this would mean the end of the Euro and the Euro is far more important to Europeans than Greece.

    What we are much more likely to see, is an orderly exit from the Euro/Eurozone by Greece, or some version thereof.

    In the meantime, 'muddle through' will be the order of the day.
    Jun 27 06:35 AM | 2 Likes Like |Link to Comment
  • Frontline's First Quarter Results Show Continuing Weakness in Shipping [View article]
    No reason to diversify from tankers. And they will not do it because the major shareholder with a third of the ownership is already diversified with Golden Ocean and Ship Finance. FRO is a pure play and should stay that way.
    Jun 14 01:11 PM | Likes Like |Link to Comment
  • Short Industrial Commodities, Avoid Global Shippers as China Crashes [View article]
    China Crashing?


    May Retail sales +16%
    May manufacturing activity +13.4%
    Trade Deficit: None
    Account Surplus: Lots
    Massive foreign creditor?: Yes
    Own massive amounts of valuable commodities in the ground all over the world? yes
    Have 200 million people hungry to get ahead and work 12 hours a day? yes
    The "Red curtain"? Last time I was in Shanghai it took a colleague10 minutes to open a corporate bank account. And no "Patriot Act" forms either. 47,000 new small businesses were started in 2009.
    The Shanghai/Beijing bullet train will operate next year. Three years to build. Will be faster to get to Beijing than flying. Let's see, last time I checked the US was looking at a toy run in the swamps in Florida and prison country around Fresno in California.
    China graduates more high school and university students per month than the US in an entire year.

    Of course a developing economy will have its swings. And China will slow down, it's normal. But I should think that we are some ways from calling this a "crash" in the making. And there will not be a US style '30's depression. Do not forget that full Yuan conversion is on the way and the effect of that will be nothing but positive.

    China doesn't outwardly profess anything nor does it pontificate in the global press. The people of China are the ones doing the doing and the government cannot do anything to stop them. Nor do they want to. Their biggest concern is uneven wealth distribution and getting the corruption down, and political unrest because of it.

    And as far as global shipping is concerned, there is plenty of opportunity with smart portfolio management to get excellent cash flow while preparing yourself for an upturn. I'm not smart enough to time that, but when I can buy the best of shipping managements for free because certain stocks trade at NAV, I will buy. Not sell or wait, and then chase the horse after it left the barn.
    Jun 14 01:08 PM | 1 Like Like |Link to Comment