Singapore Shipping Corp

[learner88]

We can play around with 2 margin, the revenue margin and the ebit margin. if you use the two ships boheme and sirius compone revenue is 14 mil and bought for 65 mil, the revenue margin is 21%. We know somewhat that EBIT for the 2 ships is 6.1 mil, so the EBIT margin is 43%. so those are the figures we can use to project.

unfortunately we don't know how much they spent purchasing the ship. there shouldn't be much tax.

but kudos for the deep research.

Thanks for your kind words.

Some sensitivity analysis just for the fun of it.

Price: 40m
Cash: 16m
Loan: 24m
Rev%: 19%, 21%
EBIT%: 40%, 43%

NPAT ------- Rev% 19% Rev% 21%
EBIT40%........ 1.8m ........ 2.1m
EBIT43%........ 2.0m ........ 2.3m

************************************

Price: 50m
Cash: 16m
Loan: 34m
Rev%: 19%, 21%
EBIT%: 40%, 43%

NPAT ------- Rev% 19% Rev% 21%
EBIT40% ........ 2.2m ........ 2.5m
EBIT43% ........ 2.4m ........ 2.8m

[Nick]

Excellent write up Learner88 ! Good review of the macro industry. Can't fault your figures and speculations. We are all playing the guessing game though like you, I expect significant earning accretion from each vessel acquisition.

1) Ship owning and chartering is tax-free.

2) I suspect that sale and leaseback terms need not follow market valuation ie market price or market rates. So if we have a case of buy low, charter low then the figures will be different albeit returns could be similar. We need more details in the upcoming annual report.

(Vested)

[learner88]

Wow I learn something new. Didn't know it's tax free. Alright, my figures don't hold anymore. Need to edit... but I will leave it for tomorrow.

[Drizzt]

hi learner88, you can reference some work i did before this > http://www.investmentmoats.com/stock-mar...om-a-ship/

some more notes. although boheme is rather large, sirius is actually not that far off in size. yet its only at 15 mil when they bought it. the drastic difference in price can be due to the jap shipper selling to SSC at a very big under price. this would mean that they charter the ship at a lower rate as well.

to them the chief costs are the fuel, maintenance, and what comes with the maintenance. this way they are like first reit.

why would lippo give the hospitals to first reit at below valuation, it is likely their rentals are lower

so all this means is that don't be surprise your new ship is actually bought closer to sirius price instead of boheme price, which you derive based on past transactions.

perhaps you can do a sample DCF, and you get an idea how much they are buying sirius at. they bought 15 mil, rev 4.3 mil, EBIT 1.8 mil, depreciation 0.75 mil.after 15 years, the cash flow should be ebit of 0.7 + dep 0.75 = 1.45 mil

[Image: Fmbp8Ry.png]

the required rate or return is about 15%. perhaps a new ship one is even higher

[learner88]

Thanks Drizzt for the info. Between buy-low/charter-low and buy-high/charter-high, I am leaning towards a bigger investment since there's the assurance of a long term charter lock-in. Nevertheless, good to see the gurus as bedfellows.

No point making any more wild guesses. It could be 18m, 30m, or 50m. Most important thing is that the acquisition is accretive, won't burden SSC with too much debt and good choice of counterparty - a " "blue chip operator" as noted in the last quarterly results.

I guess we as small shareholders will have to trust OCK's market timing and familiarity with the sector.

Good luck to all.

[kbl]

Good afternoon everyone.

sold 18lots @0.255 in buy in market. Bot back 18lots at @0.245. CP-47 and 17.

<vested><not a call to buy or sell>

[Greenrookie]

Hi buddies,

Have a question, can the counterparty change the charter rate before the long term charter runs out? What are the circumstances that allowed such a renegotiation to take place?

Thanks in advance fr your answers...

[Nick]

Hi buddies,

Have a question, can the counterparty change the charter rate before the long term charter runs out? What are the circumstances that allowed such a renegotiation to take place?

Thanks in advance fr your answers...

Technically, there are no room for renegotiation of the 15 year charter contracts. So I presume, the intent of the question is whether a risk for counter-party defaulting on the contract exist. The answer, as always in any contracts, is yes. The recent weakness in shipping trusts has already shown the existence of defaults on shipping charter contracts by smaller ship operators. However, SSC doesn't deal with the volatile shipping sectors like dry bulk or tankers - it deals solely in the very niche and small car carrier market dominated by a few European and Japanese blue chip players. Hence, SSC clients are fairly large companies and have worked with SSC for 2 decades. I don't recall any charter rate issues in its listing history.

(Vested)

[specuvestor]

It's a matter of how much you value the client or the supply chain ie negotiation power. In 2008 when BDIY collapsed 95% in a year all the contracts are waste paper... it's just a matter of trust and compromise. 2008 is the best point to see a shipping company's credit risk and counterparty worth.

[kbl]

Good evening everyone.

Results out. EPS (us cents)2cts. Dividend 1cts singapore.

With the acquisition of two 6,500-unit pure car and truck carriers, in progress for long-term charter to a blue chip operator, the ship-owing business is expected to perform better in the next financial year. The acquisitions are each expected to be completed in August 2014 and November 2014. The focus is to build up a younger fleet with quality long-term charters.
The earnings prospects for FY2015 is expected to be better, barring any unforeseen circumstances.
http://infopub.sgx.com/FileOpen/SSC31031...eID=298188

<vested><not a call to buy or sell>