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04-01-2011, 11:20 AM
(04-01-2011, 10:08 AM)Musicwhiz Wrote: Perhaps what I am asking is - how closely does the share price or intrinsic value of Mercator fluctuate with the BDI?
As for other bulk carrier companies out there (e.g. Courage Marine), is this also the case?
Hi MW and freedom,
Although Mercator have almost 70% of its charter contracts locked in the previously negotiated charter rates, Mercator share performance fluctuates with respect to BDI sentiment. If BDI has an upwards trend, Mercator share price would tend to rise as well as it means it will be able to renew some of its long term charter contracts in high charter rates in the future as well and the vessels it own become more valuable as it will be able to generate higher future income (similar to properties when prices are higher).
As for CM, if I not wrong, they follow mostly the charter rates from BDI so which means the actual revenue fluctuates with the actual BDI movements.
So who is better in this case. I would say Mercator is better now as BDI rates are low. However, in the scenario of high BDI, CM will defintely be better in revenue growth. To judge between the two companies, one has to look further into the B/S performance and cost management.