Singapore Shipping Corp

[Contrarian]

> 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.

I fully agree and hope the charterers want 5-10 yr old ships.
This decision is likely to depend on NYK and NYK's automotive customers. So where the cost makes the most sense for SSC's charter customers, SSC will need to support.

My gut feel is that the 2 sister vessels are fire sale. Very rare.
If I am proven wrong, I am more than happy :-)

Whatever Charterer ask, SSC will need to respond. They are after all still a service provider to a major :-)

[chinafarmer]

The Q1 results could have been even stronger if not for the loss of charter revenue from one offhire ship due to drydocking. Also the agency business yoy was down by USD 500k. I also think there were one off startup costs involved for Taurus Leader.

On a steady state this company can hit USD 4m per quarter.

[chinafarmer]

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 ?

I read the annual report section on lease commitments.

My conjecture is that you guys have wrongly assumed that the commited leases for the 2 second hand sister ships are for 15 years. I think they are on 10 year leases with 5 year options as such chairman said POTENTIAL revenue of 188m USD for 15 years.

[Boon]

1Q2016 results (ending 30th June 2015):
 
Revenue (USD million)
FY2014 = 34.446
FY2015 = 35.126
1Q2016 = 11.706 (Annualized = 46.824)
 
Revenue - Ship Owning (USD million):
FY2015 = 19.527
1Q2016 =  8.930 (Annualized = 35.720)
(Note: 35.720 as compared to 36.637 on page 111 of AR2015 => close....)
 
NPAT (USD million)
FY2014 = 8.558
FY2015 = 9.310
1Q2016 = 3.036  (Annualized = 12.144)
 
NPM
FY2014 = 24.8%
FY2015 = 26.5%
1Q2016 = 25.9%
 
EPS
FY2014 = USD 2.0 cents
FY2015 = USD 2.1 cents
1Q2016= USD 0.7 cent (Annualized = 2.8 cents)
 
DPS
FY2014 = SGD 1.0 cent
FY2015 = SGD 1.0 cent
 
FCF (USD million):
1Q2016 = 7.450 m (net cash from operating activities) – 0.918 m (net cash used in investing activities = mainly consist of capitalization of dry-docking expenses) – 3.539 m (net cash used in financing activities = principal repayment + interest costs) = 2.993 m


Comments:
1)  Well, the quarterly revenue contributions from Taurus Leader and Centaurus seemed to have been fully captured in the 1Q2016 results, which appeared consistent to the revenue projected in AR2015 (page 111). No doubt, these revenue contributions are not as high as initially anticipated by some buddies, nevertheless Group revenue had increased substantially as a result of the delivery of 3 vessels from the ship owning segment.
2)  The group generated positive FCF of USD 2.993 m in 1Q2016 (About USD 12 m on annualized basis).
3)  Management Comment: “The Group performed well for Q1 FY2016. With a stable base of recurring income, the Group is positioned to continue its growth strategy of acquiring more vessels with quality long term charters. Going forward, the Group anticipates that contributions from its agency & logistics segment will be less significant given the larger scale of ship-owning. Barring any unforeseen circumstances, the Group expects to perform better in FY2016.” 

(vested)

[thec00l]

-- Initiation from RHB -- 

We initiate coverage on Singapore Shipping Corp Ltd (SSC), the only listed “pure play” Pure Car Truck Carrier (PCTC) company in the world, with a DCF-derived SGD0.59 TP (implying a FY16F P/E of 13.5x), representing 100% upside and recommend BUY. SSC is a rare gem  that offers both safety and growth in the highly-cyclical shipping sector. Operating in the highly oligopolistic PCTC sector, SSC carved a profitable niche by 1) securing a decade-long profit visibility through its long term charters to blue chip clients and 2) enjoying quality growth with its fleet expansion plans.
Close relationships secure decade of profit with long term charters. In the oligopolistic PCTC industry, SSC’s close relationships with its customers helped it secure decade-long profitable charters with blue chip majors like NYK Line and favourable borrowing rates due to its low-risk profile. Together with a minimum forex and oil price exposure, SSC has its profits virtually protected for the next 15-20 years.
Quality growth ahead, supported by robust operating cash flow. Through its existing charters, we estimate that SSC will generate a robust operating cash flow of c. USD22.8m in FY16. This means that SSC will have sufficient resources internally to support its expansion plans, allowing its profit to grow at a CAGR of c. 21.8% from USD9.3m in FY15 to USD20.5m in FY19F under our base case scenario.
Excellent track record of capital allocation and treating minority shareholders well. SSC’s management disposed of its shipping fleet before the peak of the cycle in 2008 and has since distributed more than USD200m in dividends. The company embarked on a fleet expansion programme last year, doubling its fleet to six vessels. Management plans to double the fleet again in the next 3-5 years. We believe that once the fleet expansion completes, the group can raise its dividend payout to 50% in FY19, implying 10.2% yield in a best case scenario.
DCF-derived TP of SGD0.59. With 1) safe earnings for the next decade, 2) quality growth ahead and 3) high FY19 dividends, we initiate coverage on SSC with a BUY and a DCF-based TP of SGD0.59 (WACC: 10%, terminal growth: 0%), representing 100% upside and implying a FY16 P/E of 13.5x.
Key risks: decreasing profits from agency business; counterparty risk from blue chip clients, particularly NYK Line.  More risks on page 9.

http://rhbosk.ap.bdvision.ipreo.com/NSig...6a2a3c39f9

[greengiraffe]

-- Initiation from RHB -- 

We initiate coverage on Singapore Shipping Corp Ltd (SSC), the only listed “pure play” Pure Car Truck Carrier (PCTC) company in the world, with a DCF-derived SGD0.59 TP (implying a FY16F P/E of 13.5x), representing 100% upside and recommend BUY. SSC is a rare gem  that offers both safety and growth in the highly-cyclical shipping sector. Operating in the highly oligopolistic PCTC sector, SSC carved a profitable niche by 1) securing a decade-long profit visibility through its long term charters to blue chip clients and 2) enjoying quality growth with its fleet expansion plans.
Close relationships secure decade of profit with long term charters. In the oligopolistic PCTC industry, SSC’s close relationships with its customers helped it secure decade-long profitable charters with blue chip majors like NYK Line and favourable borrowing rates due to its low-risk profile. Together with a minimum forex and oil price exposure, SSC has its profits virtually protected for the next 15-20 years.
Quality growth ahead, supported by robust operating cash flow. Through its existing charters, we estimate that SSC will generate a robust operating cash flow of c. USD22.8m in FY16. This means that SSC will have sufficient resources internally to support its expansion plans, allowing its profit to grow at a CAGR of c. 21.8% from USD9.3m in FY15 to USD20.5m in FY19F under our base case scenario.
Excellent track record of capital allocation and treating minority shareholders well. SSC’s management disposed of its shipping fleet before the peak of the cycle in 2008 and has since distributed more than USD200m in dividends. The company embarked on a fleet expansion programme last year, doubling its fleet to six vessels. Management plans to double the fleet again in the next 3-5 years. We believe that once the fleet expansion completes, the group can raise its dividend payout to 50% in FY19, implying 10.2% yield in a best case scenario.
DCF-derived TP of SGD0.59. With 1) safe earnings for the next decade, 2) quality growth ahead and 3) high FY19 dividends, we initiate coverage on SSC with a BUY and a DCF-based TP of SGD0.59 (WACC: 10%, terminal growth: 0%), representing 100% upside and implying a FY16 P/E of 13.5x.
Key risks: decreasing profits from agency business; counterparty risk from blue chip clients, particularly NYK Line.  More risks on page 9.

http://rhbosk.ap.bdvision.ipreo.com/NSig...6a2a3c39f9

I like analysts - they are the biggest bull mkt friends...

To me, I have been expecting this rara show for a long time especially after so much quality work that has been put in by VBs.

Anyway, Roro is a Cartel business. Given that global vehicle growth rates will remain steady and major vehicle mfgers are relocating closer to their customer bases, the demand for Roro will remain steady.

SSC will be highly dependent on their principals for asset light opportunities. It has very little to do with SSC but more on the principal's plans.

Ow has done well and his relationships count going forward but one should not forget about the competition as the other players oso need to have their fair share in order to be kept happy.

If SSC can see 40 or possibly 50, I m very happy.

Vested
GG

[Jacmar]

-- Initiation from RHB -- 

We initiate coverage on Singapore Shipping Corp Ltd (SSC), the only listed “pure play” Pure Car Truck Carrier (PCTC) company in the world, with a DCF-derived SGD0.59 TP (implying a FY16F P/E of 13.5x), representing 100% upside and recommend BUY. SSC is a rare gem  that offers both safety and growth in the highly-cyclical shipping sector. Operating in the highly oligopolistic PCTC sector, SSC carved a profitable niche by 1) securing a decade-long profit visibility through its long term charters to blue chip clients and 2) enjoying quality growth with its fleet expansion plans.
Close relationships secure decade of profit with long term charters. In the oligopolistic PCTC industry, SSC’s close relationships with its customers helped it secure decade-long profitable charters with blue chip majors like NYK Line and favourable borrowing rates due to its low-risk profile. Together with a minimum forex and oil price exposure, SSC has its profits virtually protected for the next 15-20 years.
Quality growth ahead, supported by robust operating cash flow. Through its existing charters, we estimate that SSC will generate a robust operating cash flow of c. USD22.8m in FY16. This means that SSC will have sufficient resources internally to support its expansion plans, allowing its profit to grow at a CAGR of c. 21.8% from USD9.3m in FY15 to USD20.5m in FY19F under our base case scenario.
Excellent track record of capital allocation and treating minority shareholders well. SSC’s management disposed of its shipping fleet before the peak of the cycle in 2008 and has since distributed more than USD200m in dividends. The company embarked on a fleet expansion programme last year, doubling its fleet to six vessels. Management plans to double the fleet again in the next 3-5 years. We believe that once the fleet expansion completes, the group can raise its dividend payout to 50% in FY19, implying 10.2% yield in a best case scenario.
DCF-derived TP of SGD0.59. With 1) safe earnings for the next decade, 2) quality growth ahead and 3) high FY19 dividends, we initiate coverage on SSC with a BUY and a DCF-based TP of SGD0.59 (WACC: 10%, terminal growth: 0%), representing 100% upside and implying a FY16 P/E of 13.5x.
Key risks: decreasing profits from agency business; counterparty risk from blue chip clients, particularly NYK Line.  More risks on page 9.

http://rhbosk.ap.bdvision.ipreo.com/NSig...6a2a3c39f9

Too bullish report. Typical of analyst, using straight line projection upwards base on latest earnings. Life is not as simple and don't go in straight line. As conservative investor I put in a bear case scenario to watch the downside and MOS as to whether to invest or not.
Globally economy is slowing down and vehicle growth cannot be independent of economy.

vested

[Boon]

-- Initiation from RHB -- 

We initiate coverage on Singapore Shipping Corp Ltd (SSC), the only listed “pure play” Pure Car Truck Carrier (PCTC) company in the world, with a DCF-derived SGD0.59 TP (implying a FY16F P/E of 13.5x), representing 100% upside and recommend BUY. SSC is a rare gem  that offers both safety and growth in the highly-cyclical shipping sector. Operating in the highly oligopolistic PCTC sector, SSC carved a profitable niche by 1) securing a decade-long profit visibility through its long term charters to blue chip clients and 2) enjoying quality growth with its fleet expansion plans.
Close relationships secure decade of profit with long term charters. In the oligopolistic PCTC industry, SSC’s close relationships with its customers helped it secure decade-long profitable charters with blue chip majors like NYK Line and favourable borrowing rates due to its low-risk profile. Together with a minimum forex and oil price exposure, SSC has its profits virtually protected for the next 15-20 years.
Quality growth ahead, supported by robust operating cash flow. Through its existing charters, we estimate that SSC will generate a robust operating cash flow of c. USD22.8m in FY16. This means that SSC will have sufficient resources internally to support its expansion plans, allowing its profit to grow at a CAGR of c. 21.8% from USD9.3m in FY15 to USD20.5m in FY19F under our base case scenario.
Excellent track record of capital allocation and treating minority shareholders well. SSC’s management disposed of its shipping fleet before the peak of the cycle in 2008 and has since distributed more than USD200m in dividends. The company embarked on a fleet expansion programme last year, doubling its fleet to six vessels. Management plans to double the fleet again in the next 3-5 years. We believe that once the fleet expansion completes, the group can raise its dividend payout to 50% in FY19, implying 10.2% yield in a best case scenario.
DCF-derived TP of SGD0.59. With 1) safe earnings for the next decade, 2) quality growth ahead and 3) high FY19 dividends, we initiate coverage on SSC with a BUY and a DCF-based TP of SGD0.59 (WACC: 10%, terminal growth: 0%), representing 100% upside and implying a FY16 P/E of 13.5x.
Key risks: decreasing profits from agency business; counterparty risk from blue chip clients, particularly NYK Line.  More risks on page 9.

http://rhbosk.ap.bdvision.ipreo.com/NSig...6a2a3c39f9

Too bullish report. Typical of analyst, using straight line projection upwards base on latest earnings. Life is not as simple and don't go in straight line. As conservative investor I put in a bear case scenario to watch the downside and MOS as to whether to invest or not.
Globally economy is slowing down and vehicle growth cannot be independent of economy.

vested

http://rhbosk.ap.bdvision.ipreo.com/NSig...de34ed3a39

Firstly, looking at page 6 of the report on SSC's charters estimate by RHB:

1) Charter estimate for MV Boheme of USD 6.4 m seems low -  it should be around USD 10.0 m per annum, if I am not wrong.

2) Charter estimate of USD 10.8 m p.a. for MV Taurus Leader seems "high" - yet to be able to figure this one out...........

Well, as always, an analysis is only as good as its underlying assumptions...................

(vested)

[SLC81]

Interesting discussion on SSC. Has anyone done some risk analysis on the company ? I am particularly interested how they have mitigated these risks, particularly, shipping incidents. PCTC ships have a big safety issue and the past, MV Singa Ace was almost capsized resulting in 100+ million in car value lost. Was their ship insured and how much they would get if, "touch wood", one of the the vessels sinks.

[Boon]

Interesting discussion on SSC. Has anyone done some risk analysis on the company ? I am particularly interested how they have mitigated these risks, particularly, shipping incidents. PCTC ships have a big safety issue and the past, MV Singa Ace was almost capsized resulting in 100+ million in car value lost.  Was their ship insured and how much they would get if, "touch wood", one of the the vessels sinks.

SSC is exposed to many risks......................

On safety related risks, my guess is most of them could be mitigated with insurance.

Interestingly, "cyber attack" could potentially result in even greater loss, according to the following review..... 

Safety and Shipping Review 2015 (An annual review of trends and developments in shipping losses and safety)
 
http://www.agcs.allianz.com/assets/PDFs/...w-2015.pdf
 
Key risks to the future safety of shipping
Automation
Big data
Cat fines
Competition
Construction standards
Criminalization of seafarers
Cyber attacks
Dangerous cargo classification
Electronic navigation
Emergency preparedness
Fallen states
Human trafficking
Hours of rest regulations
Ice shipping
Increasing ship sizes
Lifeboat drills
Liquefaction
LNG as a fuel
Loss of power
Misappropriation of cargoes
Natural catastrophes
Passenger ship safety
Piracy
Places of refuge
Quality of crew
Safe minimum crewing levels
Search and rescue challenges
Slow steaming
Substandard operators
Training standards
Unmanned ships
War risks
 
“A future claim related to a cyber attack could be ‘tremendous’, potentially resulting in a total loss of the vessel. It could even involve multiple vessels from the same company”