Seaspan: Full Speed Ahead - Barron's

Includes: DAC, DRYS, SSW
by: Judy Weil

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Smooth Sailing by Kopin Tan

Summary: Growth and value play Seaspan (NYSE:SSW) is a container ship-leasing company with a 6% dividend yield and significant exposure to China, which accounts for 1/3 of the global shipping trade. The first to lease ships, Seaspan has expanded its fleet of 55 ships worth $3.9 billion, from 23 ships, worth $1.5b, at its 2005 IPO. Seaspan anticipates 100 ships at a $7b-$10b value by 2010 through 1) Its geographically expanded client base, to hedge against China's frothy market. 2) Its sharp management, which orders new ships after pre-signing, steady-yield leasing agreements and arranging staggered contract renewals, which allows safe expansion and hedging against the cyclicality of the shipping trade. 3) Its younger fleet to rivals like Danaos (NYSE:DAC) and lower debt-to-capital ratio of 50% vs. the industry norm of 70% along with its general conservative financial management will enable greater access to credit for expansion and protection against overheated markets. 4) Seaspan's 49% share rise this year pales next to rival Dryships' (NASDAQ:DRYS) 262% rise, but its lower name recognition gives it more upside potential. Bulls expect global trade expansion to allow a 10% dividend hike in both 2009 and 2010, making rising bond yields less tempting. Shares should rise 15% to $36 from the current $31.62.

Related Links: The Global Shipping Industry: Not Such a Small World After AllA Tale of Two Tankers: Seaspan or Knightsbridge?Seaspan: Undervalued, High-Yield Chinese Shipper

SSW 1-yr. chart:

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