value observations in the shipping sectorforums.capitallink.com/shipping/2011greece/pres/pwc.pdf ·...
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Value observationsin the shipping sector
www.pwc.com
2nd Annual Capital Link Greek Shipping Forum22 February 2011
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Defining value…
2
What is Value?
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Value is like beauty…
it’s in the eye of the beholder
…and the answer
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Value relationship
4
Value of Shipping Companies
Vessels’ value
Net Asset Value
(Equity)
Market Cap
Net Debt
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Overview of Dry/Wet market over the period 2007-2009
5
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Most dry bulk companies consistently trading below their NAV since 2008
Notes:
- Market Caps have been calculated as the 2 month average after the reporting date.
- Non controlling interest has been excluded from the NAVs.
- BDI presents the Baltic Dry Index 2 month average (January – February of 2008, 2009, 2010).
6
24
810
1
2119
7022
1361
2923
0
1000
2000
3000
4000
5000
6000
7000
8000
0
5
10
15
20
25
30
2007 2008 2009
Balti
c Dr
y In
dex
# of
com
pani
es
Market capitalisation vs. Net Asset Value performance
Trading at a premium Trading at a discount BDI
Source: Published Financial Statements, Reuters, Clarkson Research
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Dry bulk - less companies trading below NAV in 2009 and at lower discount
7
Source: Published Financial Statements, Reuters
22
5 4
2 3
6
12 13
1
9
6
-
5
10
15
20
25
2007 2008 2009
# of
com
pani
es
Premium > 50% Premium < 50% Discount < 50% Discount > 50%
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Wet market trend is similar to that of dry market
8
Notes:
- Market Caps have been calculated as the 2 month average after the reporting date.
- Non controlling interest has been excluded from the NAVs.
- BCTI and BDTI present the Baltic Clean & Dirty Tanker Indices 2 month average (January – February of 2008, 2009, 2010).
19
8
10
1
1211
1244
654
1035
0
200
400
600
800
1000
1200
1400
0
4
8
12
16
20
2007 2008 2009
BC
T &
BD
T In
dice
s
# of
com
pani
es
Market capitalisation vs. Net Asset Value performance
Trading at a premium Trading at a discount BDTI
Source: Published Financial Statements, Reuters, Clarkson Research
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Tankers – more companies trading above NAV in 2009
9
Source: Published Financial Statements, Reuters
15
6 6
4
2
4
1
87
4 4
0
2
4
6
8
10
12
14
16
2007 2008 2009
# of
com
pani
es
Premium > 50% Premium < 50% Discount < 50% Discount > 50%
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Containers – different trend to wet and dry sectors…Why ?
Notes:
- Market Caps have been calculated as the 2 month average after the reporting date.- Non controlling interest has been excluded from the NAVs.
10
8
2
8
3
10
4
1
4
7
10
13
2007 2008 2009
# of
com
pani
es
Market capitalisation vs. Net Asset Value performance
Trading at a premium Trading at a discount
Source: Published Financial Statements, Reuters
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Quantitative / Qualitative Analysis (2009 data)
11
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Dry bulk sector – 3 companies illustration
12
Source: Published Financial Statements, Reuters
Company2007
trading at2008
trading at2009
trading at
D1 Premium Premium Premium
D2 n/a Premium Premium
D3 Premium Discount Discount
168.8%
35.6% 14.5%
1071.2%
467.6%507.1%
-48.1% -67.0%
-300%
-100%
100%
300%
500%
700%
900%
1100%
2007 2008 2009
Market Cap vs. NAV performance
D1 D2 D3
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Dry bulk sector – 3 companies illustration Common factors
• All three companies are listed on NYSE
• All companies have a fleet size exceeding 1.1 million dwt
• Vessels’ market values are not disclosed in the financial statements
• No impairment recorded in 2009
13
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Dry bulk sector – 2009 data (MC Q1 2010)
14
Source: 2009 Published Financial Statements
Criteria Assessed Company D1at Premium
Company D2at Premium
Company D3at Discount
Long Term Contracts Coverage
100% of fleet on TC(45% of TCs expire in
2010-2011;Remaining expire by 2016)
100% of fleet on TC(38% of TCs expire in
2010-2011;Remaining expire by 2016)
68% of fleet on TC(87% of TCs expire in
2010-2011;Remaining expire by 2016)
Dividend Policy No Dividend since Q4 2008 Yes, stable No Dividend since Q4 2008
Average Fleet Age(in years)
4.8 3.6 9.7
Debt Issues None None Breach of covenants / waivers agreed
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Tanker sector – 3 companies illustration
15
Source: Published Financial Statements, Reuters
Company2007
trading at2008
trading at2009
trading at
T1 Premium Premium Premium
T2 Premium Discount Discount
T3 Premium Discount Discount
316.0%
72.9%
121.6%
33.9%
-35.7%
-71.0%
81.4%
-5.2% -18.3%
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
350%
2007 2008 2009
Market Cap vs. NAV performance
T1 T2 T3
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Tanker sector – 3 companies illustration Common factors
• T1 and T2 are listed on NASDAQ, while T3 is listed on NYSE
• All companies have a fleet size exceeding 0.7 million dwt
• Vessels’ market values are not disclosed in the financial statements
• Only T3 recorded an impairment on vessels in 2009
16
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Tanker sector – 2009 data (Q1 2010 MC)
17
Source: 2009 Published Financial Statements
Criteria Assessed Company T1at Premium
Company T2at Discount
Company T3at Discount
Long Term Contracts Coverage
94% of fleet on TC(65% of TCs expire in
2010-2011;Remaining expire by 2018)
50% of fleet on TC(17% of TCs expire in
2010-2011;Remaining expire by 2015)
67% of fleet on TC(68% of TCs expire in
2010-2011;Remaining expire by 2014)
Dividend Policy Yes (increasing since 2007) Yes (decreasing since 2009) Yes (decreasing since 2009)
Average Fleet Age(in years)
3.5 3.3 6.8
Debt Issues Covenants amended Under negotiation to obtain waivers
None
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Conclusion
18
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Potential factors affecting value
19
Factors that may be influenced by Management:
• Dividend Policy
• Time Charter Coverage
• Fleet Age
• Governance / Transparency
Factors which are outside Management’s control:
• Economic Outlook / Market Conditions
• Investor Sentiment
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Final Thoughts
20
«’Ετεόν δε ουδέν ίδμεν. Εν βυθώ γαρ η αλήθεια.»
“We know nothing for sure: truth is hidden at the bottom of the ocean.”
Bridging Value to Accounting
• Purchase Price Allocation
― Assigning fair values to company’s balance sheet
― Recognizing intangibles like backlog assets/liabilities
Thank you
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