Singapore Shipping Corp

[learner88]

Q1FY15 is out.

And SSC had the AGM today.

First of all, a gripe. Please please do your homework before attending the AGM if you are going to ask questions. You may say that there are no dumb questions. I beg to differ.

Ok, with that out of the way....

The acquisition of the 2 vessels due for delivery in Aug 2014-Feb 2015 will be "fully funded by internal resources". Even looking at the Q1FY2015 cash hoard, I don't see how they can do it. "Internal resources" means no further debt to me. Is that possible? As of end Q1FY2015, cash levels reached US$20.8m. How can they pull out another US$12.2m? Anyway, it's a happy problem.

OCK is barely able to tolerate shareholders. If you are looking for a super shareholder friendly Chairman/major shareholder, please look elsewhere. Between the prepared statements and his comments, they are happy to reveal and carry out the minimum required. Seconders to resolutions? Not here at SSC. More footnotes to explain the cost structure etc? Nah. Not required.

OCK/SSC has an excellent reputation among the Japanese operators. While they also have the Koreans as customers, the relationships with the Japanese have been built up over decades. That is why SSC is able to buy the 2 new vessels for just US$33m and to charter it back. This is also because they trust SSC to do a good job.

MOST MOST MOST MOST MOST IMPORTANT REVELATION: SSC/OCK is not done yet. They are considering more acquisitions and will buy more vessels if the prices are right - purchase price and charter rates. So funding options include more debt, or rights issue?

Anyway the two vessels could be:
1. Liberty Ace
2. Paradise Ace
3. Prominent Ace
4. Utopia Ace

Haven't fully reviewed the Q1 figures. Agency business took a dip. Nothing to be too concerned about, in my humble opinion. Lets see how they perform in Q2.

Vested.

[Drizzt]

Q1FY15 is out.

And SSC had the AGM today.

First of all, a gripe. Please please do your homework before attending the AGM if you are going to ask questions. You may say that there are no dumb questions. I beg to differ.

Ok, with that out of the way....

The acquisition of the 2 vessels due for delivery in Aug 2014-Feb 2015 will be "fully funded by internal resources". Even looking at the Q1FY2015 cash hoard, I don't see how they can do it. "Internal resources" means no further debt to me. Is that possible? As of end Q1FY2015, cash levels reached US$20.8m. How can they pull out another US$12.2m? Anyway, it's a happy problem.

OCK is barely able to tolerate shareholders. If you are looking for a super shareholder friendly Chairman/major shareholder, please look elsewhere. Between the prepared statements and his comments, they are happy to reveal and carry out the minimum required. Seconders to resolutions? Not here at SSC. More footnotes to explain the cost structure etc? Nah. Not required.

OCK/SSC has an excellent reputation among the Japanese operators. While they also have the Koreans as customers, the relationships with the Japanese have been built up over decades. That is why SSC is able to buy the 2 new vessels for just US$33m and to charter it back. This is also because they trust SSC to do a good job.

MOST MOST MOST MOST MOST IMPORTANT REVELATION: SSC/OCK is not done yet. They are considering more acquisitions and will buy more vessels if the prices are right - purchase price and charter rates. So funding options include more debt, or rights issue?

Anyway the two vessels could be:
1. Liberty Ace
2. Paradise Ace
3. Prominent Ace
4. Utopia Ace

Haven't fully reviewed the Q1 figures. Agency business took a dip. Nothing to be too concerned about, in my humble opinion. Lets see how they perform in Q2.

Vested.

i sort of listen to the narrative in a very different way. the chairman Ow have stated yes internal resources, but he is also stating that most likely this would mean that they will go into debt. hence you can see how funding its done.

someone asked a question on the debt financing. not much was given. a lot of trust needed there.

when he said he is not done, we got to moderate our expectations. he would probably have said the same about St****** and look at when it is the last acqusition.

the point i am making is that businessmen are always open for businesses, its just whether they do the deal.

Chariman Ow stated he can buy a ship tomorrow if he wants, and i believe him to be able to. it is likely folks are pimping propositions to him.

When he bites, it is usually deals with serious margin of safety. this is how i read it.

[thefarside]

Assuming US$2 mil reserve for operating purposes, they can use US$18mil on 70% financing to have total buying power of US$60mil. Enough for another 3-4 of the vessels. If they can get the deals at those prices I'd say please land it tomorrow!

[learner88]

I thought he said that they had enough for the 2 vessels. But it doesn't really matter.

Any further acquisitions will require additional funding either through debt or a rights issue.

Come next year, I hope they would have bought more vessels and leverage up to a sensible level to take advantage of the low prices and good macro trends.

[Nick]

Internal resources includes debt financing. It just means the company doesn't need to tap on equity financing by placing out new shares or raising capital via rights issue.

Singapore Shipping Corp has a relatively clean capital structure - currently net cash with amortizing loans fixed at low interest rates.

Post acquisition of the 2 vessels, net debt to equity will be around 40 - 45%. This is fairly low compared to most established shipping and offshore plays listed here. More importantly, the debt is being secured against cash generating assets with fixed charters so I reckon it is fairly 'safe'. Personally, I think the 2 deals were concluded at very attractive prices for us. Much better than any of us here expected.

If Ow makes a similar deal, net debt to equity will hit 90-100%. A fairly high gearing (almost like the pre crisis shipping trust level), but not unusual in this sector. The key point is SSC retains a significant sum of its profit and repays debt promptly and its debt are tied to cash generating assets. Bankers would love to finance such deals.

As Kyith alluded, financing isn't the stumbling block for more acquisitions. It will be the charter deals - can we find such valuable charters for ships we acquire ? If not, then it is unlikely any deals will be concluded.

Lastly, my speculation that SSC earnings will hit US$10 million or nearly 3.0 SG cents EPS remains intact for now.

(Vested)

[Drizzt]

Internal resources includes debt financing. It just means the company doesn't need to tap on equity financing by placing out new shares or raising capital via rights issue.

Singapore Shipping Corp has a relatively clean capital structure - currently net cash with amortizing loans fixed at low interest rates.

Post acquisition of the 2 vessels, net debt to equity will be around 40 - 45%. This is fairly low compared to most established shipping and offshore plays listed here. More importantly, the debt is being secured against cash generating assets with fixed charters so I reckon it is fairly 'safe'. Personally, I think the 2 deals were concluded at very attractive prices for us. Much better than any of us here expected.

If Ow makes a similar deal, net debt to equity will hit 90-100%. A fairly high gearing (almost like the pre crisis shipping trust level), but not unusual in this sector. The key point is SSC retains a significant sum of its profit and repays debt promptly and its debt are tied to cash generating assets. Bankers would love to finance such deals.

As Kyith alluded, financing isn't the stumbling block for more acquisitions. It will be the charter deals - can we find such valuable charters for ships we acquire ? If not, then it is unlikely any deals will be concluded.

Lastly, my speculation that SSC earnings will hit US$10 million or nearly 3.0 SG cents EPS remains intact for now.

(Vested)

the job for us is to determine the fixed deposit factor.

if no ships are purchased, and we earned 3 cents, its an earnings yield of 11% based on share price of 26.5 cents. at the end of 11-15 years, you will still have a bunch of cash accumulated since they are not paying out depreciation. would this be a safe return for all of us?

the upside will additional future deals.

[valuebuddies]

For this kind of business, we have to always remind ourselves over the risks involved:

1) risk of default by charterees - reference FSL case
2) risk of overstretch - reference RMT case

[ vested ]

[greengiraffe]

i think u better do yr own research before firing from yr hip.

When Ow hears yr concerns or if you innocently voice yr concerns to him, it is likely that he will become grumpy...

For this kind of business, we have to always remind ourselves over the risks involved:

1) risk of default by charterees - reference FSL case
2) risk of overstretch - reference RMT case

[ vested ]

[valuebuddies]

Most of us vested not only because of its high yield and high fcf business, but also trust on Mr. Ow. However we can't simply assume it is a risk free investment comparable to fd in the bank. Well the risk of overstretch is within the control of the company, but risk of default from customers is not the case. Though they are blue chips customers, but who says blue chips will not fail?

[Contrarian]

> they can use US$18mil on 70% financing to have total buying power of US$60mil

Today the debt (LT + short term) to ship asset ratio is around 40%.

My friend asked a question on the purchase of the ships. OW YEW HENG said ONE NEW RORO SHIP COSTS US$40M
THey got 2 10 year old RORO for US$33M???

Did my friend hear wrongly? Anyone at the AGM?