glenwpeterson

4 Comments

    • Dry Bulk Shipping Valuations Approach “Bubble” Proportions [view article]
      I thought I would return to Mr. Gill related to his comments back in July about the Shipping stocks being in a bubble. At this point, I'd say we are a lot closer than we were in July. But if you were short shipping stocks when Mr. Gill wrote this article, you would have been torched. The BDI is well over 10,000. DRYS, EXM and others are leveraged directly to next years rates as in the case of the former, over 90% of it's ships will be rechartered into this high rate environment which is taking shape for 2008.

      I made a note on my calendar to remind myself to comeback to Mr. Gill and ask him what went wrong with his analysis.

      But, to frank, this is all rather tongue in cheek. I know what went wrong.

      1. China GDP is still surging.
      2. India GDP is still surging.
      3. Brazil GDP is still surging.
      4. China is a net importer of coal now.
      5. Incremental Drybulk supply is being sucked up by Chinese intra-coastal trade. So, while the supply numbers show these ships as available, they are not.
      6. China and Indian demand for steel are increasing at rapid rates as evidenced by higher and higher prices for iron ore, as well as a return to high rates for met coal.
      7. Australian drought means Asia will have to seek grain from North and South American lengthening ton miles in the sector. The same can be said for India's protection of iron ore exports. That's making China go to Brazil.

      The order book doesn't look to turn unitl 2009-2010 time frame.

      Until then, I'd suggest you close your shorts out, for the time being.
      Yes there is still more room to run......

      I hate to say it....but I told ya so.....!

      GWP       Oct 17 02:28 PM
    • Dry Bulk Shipping Valuations Approach “Bubble” Proportions [view article]
      Respect your opinion, but I think the commodity supercycle and emergence of India, China, Brazil, et. al economies represent a paradigm shift in the global economy that will have some legs.

      So, no, I don't believe it's priced in.

      Your argument amounts to analyst speak. What goes up must come down and is hard to argue with as everyone understand pricing elasticity. Trouble is, no one knows how big the rubber bands are or how long it will take them to snap. Years ago, there was the United States, and, er, well, the United states that drove world economic development. Now, that paradigm has changed (forever, I think) with the rise of China, India, S.E. Asia, and Brazil....you could throw Russia in to as we've all heard of the "BRIC" companies.

      I also think you miss synergies and growth through market share acquisition. Consider the recent purchase (announced today) of EGLE and 26 new builds. There were contracts signed for 10 years on these ships. This is unpresidented. The customers were described as a major European shipping company and a public company, both having investment grade credit ratings (BBB). Not exactly fly-by-night iron ore steel mills in China. This industry is highly fragmented. And the supra-max class ships are being snagged by China for intra-coastal trade which is sapping up a lot of excess supply for trans-ocean transport.

      I see FCF for 2009 on these contracts with profit sharing around $3-$3.50 for EGLE. Not exactly chicken feed. I Look at companies like QMAR, GNK, EGLE, OCNF and others as solid buy and hold divy yielders with years of earnings power in front of them and the ability to pay down debt, pay a divy and built NAV through debt and equity purchases and earnings and FCF paydown of that debt.

      Can't see how this is all going to unravel when you're able to book this kind of contract with profit sharing for 17 of 21 ships.

      You could be right eventually....in the next decade of so.

      GWP       Jul 25 06:02 PM
    • Are Shipping Stocks Sinking? [view article]
      You can't simply lump all these companies together and paint them over with a broad brush....

      USS is a shuttle tanker company that's had it's problems for years....

      Eagle is a dry bulk shipper with long term contracts and the potential to increase the divy next year to an exit rate of $2.50 according to the Jeffries analyst who has been spot on in this sector.

      ONAV is a pure play product tanker company with three year committments and 100% booked through 2008 and 63% booked through 2009.....It's got more ships coming on-line and solid charterer committments.

      SFL isn't really a tanker company, it's like a tanker finance company that buys the assets and leases them back. SFL has very long term committments and the ability to organically grow at 10% per year, whilst paying down debt and increasing it's cash flow. It's branching out after complete divestiture from Frontline and is getting into financing FPSO's and Bulk Tankers.

      Not a big fan of spot market oil tankers like FRO, NAT, et. al., but we're coming into the strong quarters and the history of FRO has been nothing but phenomenal with respect to creating shareholder value.
      And the long term growth in oil requirements from the developing world will increase ton miles and by 2010, we should be back to a pretty tight market as single hulls get completely phased out due to international maritime regulations.

      Frankly, I don't think the author has done a lot of research on any of these companies.

      GWP       Jul 23 11:02 AM
    • Dry Bulk Shipping Valuations Approach “Bubble” Proportions [view article]
      Sounds like a very big dose of talking your book to me. Let's short the shares of a company that has, indeed, run up big time, and then hope for some help. Trouble, is the sector is on fire for good reasons.

      1. There is currently, in the 2007 and 2008, a dearth of the ships this author thinks the new ship yards (unfinished shipyards) in China are going to pump out. Problem there is it takes awhile to build them. Like about three years. And there is a three year back log. Go figure. Did I mention that these shipyards aren't coming on-line until 2010.

      2. Ton miles have increased in the sector as well adding fuel to the fire. This is because India has created a tax on it's iron ore exports to keep the prices down for it's own steel-makers at home. As such, China is now seeking iron ore for those very same ship yards to build the ships (out of steel) from Brazil and S. America. Ergo, longer routes tie up more ships for a longer time. When is that situation going to change. Not anytime soon. I might add that India's GDP growth is also creating increased demand for shipping in and out of that country as well.

      3. Bumper crops of corn and beans are coming out of N. and S. America this year too. China now imports a ton of grains from both places, as it's rising standard of living is fueling a better diet, filled with grain fed beef, poultry and hogs. Can you say, Brazil. I knew that you could. They've got the biggest reserves of arable land for Ag growth in the world. It's a long way from China to Brazil.

      4. The author mentioned China's thirst for coal correctly. They recently became a net importer for the first time and that trend is not likely to go the other way any time soon. Especially if all those shipmakers actually do get up and running.

      5. Ya wanna talk Australian infra-structure problems, it's not just a port problems, it's a rail problems too. If you can't get the stuff to market due to demand, ya gotta not only improve the ports, but improve the rail capacity too. Again, how long does it take to put on extra track and trains and locomotives. Not as fast as it takes to fire up a few "widget" plants in this authors mind, I can tell you that.

      6. First and formost, you're comparing apples to oranges with GNK and DRYS. GNK book medium term time charters. Currently most of their ships are running on charters booked two and three years ago at $45K. 8 of the 19 panamaxes and handys are coming off charter from all those unhappy, fickle customers.
      And current spot rates are miles, and I do mean, miles above current medium term charter rates. DRYS is a pure play on the spot market and it's fortunes will be volatile for sure. But I wouldn't bet against it in the next 18 months unless the world economy stumbles big time.

      7. The author conveniently failed to point out that the industry is also highly fragmented. No single owner owns more than 5% of the the entire world fleet of any of the main classes of ships. In fact, the industry looks a lot like the oil tanker industry did back in 1999. A quick fact check will show you that there has been significant consolidation, and all of the public companies have benefited enormously as they have steadily grown their earnings and assets. Those with liquidity are going to be able to grow market share big time. GNK just bought 9 capesize vessels and will be increasing it's earnings power by over 50%. At the same time, it's increased it's position in a Chinese Shipping company as well.

      Want to short these companies. Be my guest. In the very near term, sub-prime jitters in the U.S. market might help you out. But, with Brazilian, Indian and Chinese GDP's on fire and Europe, Japan and Korean doing just fine, I'll take my chances that those shipyards he talks about will start delivering ships in 2010. Until then, I think I'll be holding what I've got and adding a few more as these stocks continue to climb north and pay big time dividends to boot.

      But thanks to all the shorts out there for putting the stock on sale from time to time.

      Check back with me in six months and let's see whose still holding their position.

      Glen Peterson
      Private Investor
      Northfield, MN       Jul 22 01:25 AM
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