SHIPPING RECOVERY

peter lee
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13 years 11 months ago #3787 by peter lee

Replied by peter lee on topic Re:SHIPPING RECOVERY

thank you to grandmaster89 for your contribution. i hv questions for forumers: 1. does BDI index lead equity index; similar to volume of transport via railway (which is watched by Warren Buffet)? fyi, stk mkt peaked in 2007 while BDI index peaked in 2008. 2. hear from someone mention that the price of real estate in china came down last month. Europe economy may slow or stay at current level. does this means that BDI will go down later? sorry to disturb forumers. i like to probe more before investing. overall, i still favour buying on dip of the shipping stks since the long term trend for equity is still up.

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Dongdaemun
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13 years 11 months ago #3788 by Dongdaemun

Replied by Dongdaemun on topic Re:SHIPPING RECOVERY

Peter, i think yr question casts the net too wide. I would look at things from a specific stock perspective. For ex, Mercator is into long-term charters, so the charter income is more or less defined. Courage Marine, on the other hand, is 70% into spot charters, so a rise in BDI is good for it and does reflect the income that the company will report. From a geographic point of view, NOL is a global business (shipping containers). But Courage Marine is an Asian business - more specifically a China business hungry for iron ore and coal. There is a link to some NextInsight stories in this thread that explains more. U may wish to check them out. Hope that helps.

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Reader!
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13 years 11 months ago #3790 by Reader!

Replied by Reader! on topic Re:SHIPPING RECOVERY

Hi Peter, The BDI isn\'t linked to the equity index directly. The BDI is simply an index which reflects the daily time charter rate for a specific vessel class. In the long run, generally dry bulkers will follow the BDI since their earnings are tied to time charter rates. But they will not track it daily. Some shipping companies will tie up a portion of their revenue to long term charter contracts to increase earning visibility. These contracts are not impacted by any change in the BDI. The BDI reflect rates for dry bulkers which transports grains, iron ore and coal predominantly. Iron ore is used for steel making while coal is used for power plants. If the real estate market gets hit, the demand for new infrastructure will fall thereby affecting the demand for iron ore. However, the Chinese and Indian Govt is building a lot of infrastructure projects within their own countries to build up their economic capabilities so the true impact remains to be seen. Do not confuse NOL with dry bulkers - they deal with 2 different things haha ! CM is essentially a Taiwanese companies with dealings in SEA and China. Mercator Lines is subsidary of India\'s second largest shipping company. SO its main business sites are in India, Indonesia and China (Cosco). Golden Ocean is a Norwegian dry bulker which recently dual listed here.

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AK71
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13 years 11 months ago #3835 by AK71

Replied by AK71 on topic Re:SHIPPING RECOVERY

FSL Trust\'s price is being battered for losing a big part of a 15% income from a long term charter. If we think about it, proportionally, its unit price should not lose more than 15% as well. However, from a price of about 60c just before the news was made known, it has plunged to close at 44.5c today. At one point, it reached a low of 42.5c today. MFI is in oversold territory. OBV is still declining. However, the price decline in the last 13 sessions show clearly a pattern of low volume pullback. The fundamentals notwithstanding, I sense an opportunity. I would be very tempted to buy some at the 138.2% Fibo line which approximates 41.5c. If the price should go as low as the 150% Fibo line which approximates 39c, I would probably get some.

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Reader!
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13 years 11 months ago #3836 by Reader!

Replied by Reader! on topic Re:SHIPPING RECOVERY

Hi AK71, I don\'t think it is wise to compare the drop in revenue to the drop in unit price. We should look at the yield instead. While revenues did drop by 15% (actually it is lesser since the vessels are now working for Rosneft directly), the net distributable income will decrease even more since 50% of the operating cash-flow is being used for debt payment. My Yield Estimator for FSLT Net Distributable Income - US$8.3 million Loss of Income from Groda US$3.73 million Gain of Income from Rosneft: US$1.26 million Gain from forfeit of Management fees: US$0.15 million New Distributable Income: US$5.98 million or US$0.01/quarter Note this excludes the following - a) Gain of Income from newly acquired vessel (estimated US$1 million/quarter). Vessel should be delivered soon. b) Usage of US$6 million for either cash payout or loan repayment which will reduce interest expense. c) FSLTM charters the vessel out to a different party at a higher rate. It is still exploring other commercial options while the 2 vessels carry out their planned voyage. d) Rosneft utilizes the 2 vessels at a much higher rate. The US$13K/day rate is a conservative estimate based on the minimum contractually guaranteed volume of goods.

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AK71
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13 years 11 months ago #3843 by AK71

Replied by AK71 on topic Re:SHIPPING RECOVERY

Hi GM89, Thanks for this. Based on your estimation of 1c dpu, down 33% from 1.5c, the fair value of FSL Trust, imo, would drop from 60c to 40c. Almost there.

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