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4:03 pm
May 18, 2012
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Jae Jun
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ugh I've had a lot of similar days lately.
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3:38 pm
May 18, 2012
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Graeme
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Ugh. Stupid Excel Maritime. Down 16% today. Just, you know, for fun.
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8:18 pm
February 9, 2012
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Graeme
| | Austin, Texas | |
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gtrockefellar said:
Sorry for the lazy writeups. Haven't had the time to do the write-ups like I promised, I told a few people on the forums but here's another idea for anyone interested.
Diamond Offshore (DO)
Here's my lazy man's writeup
Company is trading at a discount b/c of the whole gulf of mexico fiasco which caused permitting issues, ect for the industry. Everyone is scared of the industry b/c of this. We need Oil. Obama and the republicans all support offshore drilling. So it's a temporary downturn in the stock price. They earn money and have a nice div yield. When the dust settles, they'll earn even more.
Started a DO post in the "D" section in your honour.
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8:17 pm
February 9, 2012
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Graeme
| | Austin, Texas | |
| Member | posts 183 |
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gtrockefellar said:
As I'm thinking about it, they probably burned up through that cash already which is how they were able to pay down their debts. Whatever is left is their other assets. Might have to do a liquidation value of this company to find the true worth. I'm gonna just stick with DSX. Sorry Graeme.
Yeah, I think I agree with you that DSX is the safest play in shipping. I'm not convinced EXM will go bankrupt if the BDI remains at these levels and since EXM has the largest fleet and I think all the bad news is baked into the shareprice, I guess I'll stick with EXM. Debating whether to buy more to smooth out my overall buy price, but I haven't decided whether that is sending good money after bad. Maybe real estate is a safer business? :)
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12:29 pm
February 9, 2012
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gtrockefellar
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Sorry for the lazy writeups. Haven't had the time to do the write-ups like I promised, I told a few people on the forums but here's another idea for anyone interested.
Diamond Offshore (DO)
Here's my lazy man's writeup
Company is trading at a discount b/c of the whole gulf of mexico fiasco which caused permitting issues, ect for the industry. Everyone is scared of the industry b/c of this. We need Oil. Obama and the republicans all support offshore drilling. So it's a temporary downturn in the stock price. They earn money and have a nice div yield. When the dust settles, they'll earn even more.
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12:11 pm
February 9, 2012
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gtrockefellar
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Post edited 4:14 am – February 9, 2012 by gtrockefellar
I am relatively new to the equities world so this is a bit confusing to me. I like DSX b/c the Cash on hand and I'm glad I am in the stock before it popped again today :)
However, I'm a little bit confused as to EXM's paid in capital. I know it's raised through their issuance of securities, but how is that equity reflected in terms of the asset side of the equation and cash. Why is it not recorded as cash and if there is actually equity which they can use to pay down their debts, is it recorded as paid in capital for reporting reasons?
What I'm worried about is that it may just be a representative figure recorded on their books of their asset values (ships) which they might have to sell in distress b/c the low cash on hand, but again my background is real estate and I am relatively new securities. Could someone please enlighten me.
—–
As I'm thinking about it, they probably burned up through that cash already which is how they were able to pay down their debts. Whatever is left is their other assets. Might have to do a liquidation value of this company to find the true worth. I'm gonna just stick with DSX. Sorry Graeme.
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2:48 pm
February 8, 2012
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Graeme
| | Austin, Texas | |
| Member | posts 183 |
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Graeme said:
It looks like a doable task…
Or is this my commitment bias showing :)
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2:46 pm
February 8, 2012
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Graeme
| | Austin, Texas | |
| Member | posts 183 |
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somrh said:
So I would guess they have about 4 years to come up with $1B.
It'll be interesting to see if any of them survive long enough to see some light at the end of the tunnel.
I guess the gamble was to borrow enough money to finance themselves through the down cycle. They issued the 1.4b in 2008 and have about 1b left over. So in 4 years they've paid off 400mil. It looks like a doable task then say Genco or Drys, but they're going to have to up their repayment from just 100mil a year.
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12:24 pm
February 8, 2012
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somrh
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DSX has about $400M in cash and about $400M in debt (per recent quarterly numbers). So that one looks safe on that level.
EXM – According to the 2010 20-F, there had two debt facilities. The largest (representing $1.4B) was due in 2016. Apparently they weren't in complaince with their loan agreements (debt ratio levels being one reason cited) and had to renegotiate aspects of their debt deals. (See pages F-24 through F-27).
According to the recent quarterly report, they had $70M in cash. About $100M of their long-term debt is now current. They still have almost $1B in long-term debt that's not current. I didn't notice any details about the maturity here. I would assume that's still all due by 2016. So I would guess they have about 4 years to come up with $1B.
It'll be interesting to see if any of them survive long enough to see some light at the end of the tunnel.
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5:57 pm
February 7, 2012
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Graeme
| | Austin, Texas | |
| Member | posts 183 |
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gtrockefellar said:
… As far as not having the stomach to add at these levels… True Value investors who are truly convicted with their picks add to their positions when the stocks drop regardless of what the market thinks, don't they? :)
Jerk 
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5:42 pm
February 7, 2012
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gtrockefellar
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Post edited 10:46 am – February 7, 2012 by gtrockefellar
Graeme said:
Debt stuff: it is a constant cycle of issuing and paying down. I don't know if this is good or bad. I tend to like the EXM model of a big dump at once and pay it down as you go..
Debt stuff: same cycle of constant issuing and payment like DRYS, but way less extreme
The constant issuing of debt is to finance the purchase of their ships. I don't think this is an issue as long as those ships remain active and create the cash flow to make the interest payments on the debt. I haven't done the detailed analysis on many of these companies because they all pose too high a risk of going bankrupt.
They all owe money on ships that aren't producing enough revenues to pay off the debt their purchase has created. EXM and DSX may be the exceptions and have the cash cushion to pull them through the downturn.
… As far as not having the stomach to add at these levels… True Value investors who are truly convicted with their picks add to their positions when the stocks drop regardless of what the market thinks, don't they? :)
…….. regardless, I don't think a bottom for this industry will be reached until some of these guys start going bankrupt and sell off their assets to pay off their creditors. There are way too many ships out there and not enough customers to go around.
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1:02 pm
February 7, 2012
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Graeme
| | Austin, Texas | |
| Member | posts 183 |
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Ok. Got some numbers for y'all (still trying to get into the Texas mindset.) I went through Excel Maritime (EXM), Dryships (DRYS), Diana (DSX), and Genco Shipping (GNK). I mainly looked at cash flow stuff to see which one I think is in the most dangerous position. But first the numbers. Got em from morningstar, so we're talking ballpark.
EXM
Debt/Equity (I used total liabilities): 1.2bil/1.7bil = 0.7
FCF/Share (2006-2010 and TTM) $2.90, $-0.90, $4.62, $1.97, $0.79, $0.39 (5/6 years of +)
$ on hand: 100mil (2010)
Debt stuff: 1.4 bil issured in 2008 with very little after that
By 2010 debt paid down to 1bil while keeping +FCF
DRYS
Debt/Equity: 3.6b/3.3b= 1.09
FCF/share (2006-2010 and TTM) $-6.21, $8.41, $-16.2, $0.48, $-1.52, $-5.29 (2/6 years of +)
$ on hand: 484mil (2010)
Debt stuff: it is a constant cycle of issuing and paying down. I don't know if this is good or bad. I tend to like the EXM model of a big dump at once and pay it down as you go..
DSX
Debt/equity: 454/1132 = 0.4
FCF/share: $-1.72, $-4.84, $2.02, $1.11, $-1.00, $0.00 (2/5 years of +)
$ on hand: 345mil
Debt stuff: same cycle of constant issuing and payment like DRYS, but way less extreme
GNK
D/E: 2.0b/1.1b = 1.8
FCF/share: $3.25, $-24.76, $-8.33, $-2.22, $-20.08, $-1.86 (1/6 years of +)
$ on hand: 271mil
debt: 1.27b issued in 2007. Between 08-10 another 1.1b issued. Only 400mil paid back in that time.
So what do I make of these? Well, I think GNK is perhaps most likely to be screwed first. 5 years of pretty brutal FCF with tons of debt issued. DRYS isn't too good either. DSX has the lowest D/E which has to count for something. I know from other articles that EXM has the biggest fleet by far, which means they have been hit hardest because they've got lots of expensive ships sitting around doing nothing. But if this thing comes roaring back, they will be in a good position. Plus from what I can make of everything, they aren't as loaded down with debt as some of the others.
I still like my valuation of EXM sitting around $4-$6 in good times, and we're not in good times. I'm sitting in double digit red on it so far and I don't know if I have the stomach to add at these levels…
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10:14 am
February 7, 2012
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gtrockefellar
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Post edited 3:52 am – February 7, 2012 by gtrockefellar
I did some research on the industry about a month ago. Seems it is an extremely cyclical type of stock and they all go bankrupt during the downcycle. None of the companies I looked up had any historical information past 2003 because they were all newly formed or re-organized after the previous cycle.
All the shipping companies I looked at currently also have extremely high debt loads around 10:1 leverage. Apparently a lot of them are breaking even or losing money by having their ships out there. Too many ships were built, not enough business to go around = rock bottom shipping prices. A lot of them also bought a ton of new ships during the boom and now owe a bunch of money for ships that they can't make money on.
On top of that, China's slowing growth has lead to less exports from the country which contributed to the shipping crunch.
—-
There was however, just one company I could find that was in good financial shape. Diana Shipping (DSX). They have a 50% debt load to their 50% cash. They were also one of few companies that haven't been reporting major losses b/c they didn't overbuy on their ships and are apparently well managed. Haven't had the time though and need to do more research on this however. Their share priced popped about 10% yesterday.
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8:16 pm
February 6, 2012
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somrh
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I think the big risk is whether or not the company will survive. Since this is a capital intensive business there are pretty high debt loads. You'd have to take a detailed look at what their debt schedule is and whether or not they have sufficient cash flows to pay down principal. If they don't have sufficient cash flows, will they be able to refinance their debts?
As an example, EXM has trailing CFO of $126M and debt over $1B if you count the short-term debt. Depending upon the debt schedule, they may have to refinance. And the markets are already pricing their stock as if it's going to go bankrupt so I'm guessing the markets would price their debt along similar lines. So will they need to refinance their debt and will they be able to at rates that will keep them alive?
I'll be interested to see what you come up with. I think this is a cyclical business at the bottom of the cycle. The big question is whether or not you can identify the survivors. A while back I held NM but felt uncomfortable with the situation and my knowledge (or lack thereof) of it so I sold out. But I think there might be potential here if you have patience and pick a company that can last long enough.
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7:47 pm
February 6, 2012
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Graeme
| | Austin, Texas | |
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7:04 pm
February 6, 2012
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Jae Jun
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Any links that you can reference for the rest of us?
Shipping isn't my strong point.
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4:00 pm
February 6, 2012
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Graeme
| | Austin, Texas | |
| Member | posts 183 |
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Ok, from what I know about the industry, all the shipping companies have too many boats for the amount of stuff that needs to be moved. The Baltic Dry Goods index is sitting at some pretty long lasting lows. All the shipping companies are sitting at some pretty serious discounts to book value, low P/Es…low everything pretty much. Seems like everyone is waiting for one guy to go bankrupt.
My favorite is Excel Maritime ($EXM) due to their FCF numbers. (Full disclosure: I own some. Much less than I bought them for. But I still trust my valuation!….I think….)
Any shipping nerds out there who can explain what the heck is going on better? Anyone think this is a good value situation at these numbers? I mean, people still need to move their stuff.
Floris, you're Dutch. You guys love water logistics. Shipping lekker mooi?
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