Singapore Shipping Corp

[Boon]

From page 2 of AR:

"In addition, I am delighted to inform you that we have also acquired a vessel named “Taurus Leader”. Largest in its generation of eco-friendly and fuel efficient Pure Car Truck Carrier, “Taurus Leader” has secured an exceptionally long term charter with a blue-chip operator. Our pride and joy, we are confident that
“Taurus Leader”, like our previous Ro-Ro vessel Singa Ace (which was scrapped last year after a 30 years charter), will anchor the Group’s earnings in the coming decades."

exceptionally long term charter => 15 + 15 = 30 years ?

In the previous year report, it was mentioned the 2 x 6,500 vessels will generate $188 million revenue over 15 years. This works out to 12.5 million charter income p.a.

This would imply Taurus Leader would be generating US$9 million revenue p.a.

Looking at the sums of the charter hire aggregating to US$450 million and deducting the US$183 million and US$154 million, we get around 12.5 years of charter ?

Nick,

Your calculations make sense, but 12.5 years is inconsistent with the statement:

"The Group leases out its vessels under operating leases. The leases typically run for initial periods of fifteen years."

[Boon]

From page 96 of AR2015:

"Intra-group financial guarantees
The principal risk to which the Company is exposed is the credit risk in connection with the guarantee contract it has issued on behalf of subsidiaries in respect of bank borrowings. The bank borrowings amounting to US$107,602,000 (2014: US$19,211,000) will mature within 3 to 15 years."

"The bank borrowings will mature within 3 to 15 years" => more or less in line with my earlier "guesstimate" on tenure of loan for Taurus Leader of 14.5 years.

(USD)

Here are some guess works..........

With the drawdown of the two new loans in 4Q2015 , of 16.5 m + 77 m = 93.5 m, amount of yearly loan repayment (principal only) has increased from 4.520 m to 12.188 m per year.

Yearly principal repayment of existing old loan = 4.520 million (would be fully repaid in 2018)

Yearly principal repayment of the new 16.5 million loan (7 years) = 16.5 / 7 = 2.357 million. (would be fully repaid in 2022)

=> Yearly principal repayment of the new 77 million loan = 12.188 – 4.52 – 2.357 = 5.311 million

=> Term = 77 / 5.311 = 14.5 years (would be fully repaid in 2030)

Over the next 3 years:

Principal repayment of loan = 12.188 m
+
Interest costs = 2m ~ 3 m
+
Dividend payment = 5 m (assuming DPS= SGD 1.5 cent )
+
Equity for new acquisition = 10 m

=> Total OCF required = 30 m per year – which seems like an tall order........

I guess the incremental OCF from Taurus Leader must at least be around 8 m - enough to service the loan (principal repayment + interest payment) - otherwise, I would not consider it to be a good deal........

Over the next 3 years - if OCF could hit 20 m per year, FCF (available for dividend payment + investing) would only be = 20 - 15 = 5m.

FCF (available for dividend payment + investing) would more likely to hit 10 m only after 3 years, when the old loan is fully repaid in 2018 - unless the charter rate for Centaurus and especially Taurus Leader are exceptionally good….....who knows....…have to wait and see…….

At US$50 to 80M per ship, this can amount to > US$300M in funding needed.

With bank generous financing of 90%, this means US$30M needed over 3 years.

The cashflow of US$12.30M is on the low side, hopefully can reach US$15M+ FY2016.

Maybe only the Jap banks dare to lend so much :-)


Vessel Capacity
Boheme =7,200 cars
Sirius Leader = 5,190 cars
Cougar Ace = 5,540 cars (30% = 1662 cars)
Capricornus Leader = 5,415 cars
Centaurus Leader = 5,427 cars
Taurus Leader = 7,000
Total capacity = 31,894 cars

To roughly double the fleet capacity => SSC needs to buy 4 to 5 more vessels with about 7,000 cars capacity.

If all future deals could be structured in exactly the same way as Taurus Leader - with only USD 3 million of equity needed for each vessel – then total equity needed is only about USD 12 to 15 million………ha-ha!

(vested)

Our debt to equity will be over 400% !

[/quote]
[/quote]

[Nick]

The only way the statement reconciles with the numbers is that the charter agreement has options i.e. 10 + 10 + 5 years charter agreement.

[thefarside]

In the previous year report, it was mentioned the 2 x 6,500 vessels will generate $188 million revenue over 15 years. This works out to 12.5 million charter income p.a.

You are assuming that the charter income is flat nominal throughout, and there are no escalation built into their respective charter rates over time, year-on-year. I have no knowledge of how these are done, but I would presume there is a modest escalation of charter rates over time, to account for increasing operating costs.

Just my two cents.

[Drizzt]

In the previous year report, it was mentioned the 2 x 6,500 vessels will generate $188 million revenue over 15 years. This works out to 12.5 million charter income p.a.

You are assuming that the charter income is flat nominal throughout, and there are no escalation built into their respective charter rates over time, year-on-year. I have no knowledge of how these are done, but I would presume there is a modest escalation of charter rates over time, to account for increasing operating costs.

Just my two cents.

check some of the shipping companies, the rates are usually fixed. so if you got a good spot rate at a height of 2007, it sticks with you.

so your job as a manager is to ensure you have a good enough margin to cover the inflation

[Boon]

Maritime investing : An income opportunity

January 2015

https://am.jpmorgan.com/blobcontent/457/...esting.pdf

[greengiraffe]

The volume done on a sleepy Roro is indeed getting really interesting:

Its a tug of war between buyers that have been confidently scooping up the endless supply of supplies through the week at near recent high levels.

The picture appears to be that of buyers betting on Ow's promise and his ability to deliver his plan over the next few years vs his skeptics...

UOB KH non rated report enclosed

Reduced Trading Core
Vested
GG

[Contrarian]

It looks like the new management is very pro analyst, unlike previous mgt team.

A good Q1 results on the surface.

Balanced sheet - Ship assets worth $161M. Bank Loan = 104.5M. So Debt to Asset ratio is 0.62

New CEO says banks are very supportive, they are under leveraged. and he plans to double the fleet in 2,3 y7ears. That means another US$300 - $400M worth of ships. I wonder how they finance this.

Can some banking or ship financiers advise on this?

1. Do you know the benchmark debt to asset ratio for RORO ship charterers?

2. Do you know why the banks are so supportive,

i. does the brand name of NYK as a charterer and the RORO business revenue stability makes the banks so generous?

ii. Or it could be NYK is guarantor of the loan, or there are some other collateral outside the company to guarantee the loan?

A ship is not like a FH assets, unless the RORO charter is like renting to Supermarket operator or Clinic??? :-)

[chinafarmer]

It looks like the new management is very pro analyst, unlike previous mgt team.

A good Q1 results on the surface.

Balanced sheet - Ship assets worth $161M. Bank Loan = 104.5M. So Debt to Asset ratio is 0.62

New CEO says banks are very supportive, they are under leveraged. and he plans to double the fleet in 2,3 y7ears. That means another US$300 - $400M worth of ships. I wonder how they finance this.

Can some banking or ship financiers advise on this?

1. Do you know the benchmark debt to asset ratio for RORO ship charterers?

2. Do you know why the banks are so supportive,

i. does the brand name of NYK as a charterer and the RORO business revenue stability makes the banks so generous?

ii. Or it could be NYK is guarantor of the loan, or there are some other collateral outside the company to guarantee the loan?

A ship is not like a FH assets, unless the RORO charter is like renting to Supermarket operator or Clinic??? :-)

Banks do not focus on debt to asset for ship financing. More likely interest cover ratios and cashflows vs loan repayments.

Banks are more than willing to lend as the charter cashflow more than matches the monthly instalment and the collateral is the ship which is being financed itself. The bank has first right to charter income and also charter insurance and the ship is being held as security. In the event of default the ship gets seized. As such banks will queue up to lend.

[Nick]

It looks like the new management is very pro analyst, unlike previous mgt team.

A good Q1 results on the surface.

Balanced sheet - Ship assets worth $161M. Bank Loan = 104.5M. So Debt to Asset ratio is 0.62

New CEO says banks are very supportive, they are under leveraged. and he plans to double the fleet in 2,3 y7ears. That means another US$300 - $400M worth of ships. I wonder how they finance this.

Can some banking or ship financiers advise on this?

1. Do you know the benchmark debt to asset ratio for RORO ship charterers?

2. Do you know why the banks are so supportive,

i. does the brand name of NYK as a charterer and the RORO business revenue stability makes the banks so generous?

ii. Or it could be NYK is guarantor of the loan, or there are some other collateral outside the company to guarantee the loan?

A ship is not like a FH assets, unless the RORO charter is like renting to Supermarket operator or Clinic??? :-)

To be fair, he could double the fleet with second hand vessels. The 2 sister vessels acquired last year only cost $33 million. Doubling the fleet with second hand vessels at such prices won't cost more than $100 million.

(Vested)