whistlerbumps Posted August 9, 2018 Share Posted August 9, 2018 Thought I would highlight an interesting situation. Grindrod Shipping (GRIN US, GSH SJ) is a dry bulk and tanker shipping company that was spun out in June from Grindrod Ltd (GND SJ). Spin dual listed on Nasdaq and JSE. Most of the initial trading has been on JSE but goal is to transition shareholder base to Nasdaq which has more shipping focused investors. As a result of this investor mismatch as well as a lack of information before H1 2018, GRIN appears to be trading at a material discount to NAV when compared to Nasdaq listed shippers. High-quality (Japanese bulkers and SK tankers), young fleet which should be well positioned for improving dry bulk market and any eventual upturn in tankers... Would be interested if anyone else has looked at it and has thoughts. Link to comment Share on other sites More sharing options...
whistlerbumps Posted September 20, 2018 Author Share Posted September 20, 2018 Since posted, the company announced a messy H1 2018 due to some long-term contracts not resetting and an expensive Force Majeure at one of their major customers. Management is now starting to get out and tell their story. GRIN appears attractive to me as it is trading at ~50% of NAV in my estimation with a young fleet and a solid balance sheet. If you are interested in shipping companies, I think its worth a look. Would be to hear thoughts from anyone else. Link to comment Share on other sites More sharing options...
mjohn707 Posted September 20, 2018 Share Posted September 20, 2018 Since posted, the company announced a messy H1 2018 due to some long-term contracts not resetting and an expensive Force Majeure at one of their major customers. Management is now starting to get out and tell their story. GRIN appears attractive to me as it is trading at ~50% of NAV in my estimation with a young fleet and a solid balance sheet. If you are interested in shipping companies, I think its worth a look. Would be to hear thoughts from anyone else. Seems interesting, I'll take a look. Are you familiar with shipping companies generally? Link to comment Share on other sites More sharing options...
whistlerbumps Posted September 20, 2018 Author Share Posted September 20, 2018 I have some familiarity... have made investments in dry bulk previously so most knowledgeable on that space and slightly less on the tankers... Link to comment Share on other sites More sharing options...
mjohn707 Posted September 20, 2018 Share Posted September 20, 2018 I have some familiarity... have made investments in dry bulk previously so most knowledgeable on that space and slightly less on the tankers... This will be new territory for me so I'll see if I can make heads or tails out of any of it. Is there some sort of way to determine what the ships are worth as a class or whatever if they were sold today? Link to comment Share on other sites More sharing options...
whistlerbumps Posted September 20, 2018 Author Share Posted September 20, 2018 The easiest way is to pay for data from Clarkson's....You can also get the Clarkson's data from a variety of sell side notes... the hardest way is to track ship purchase and sales.... Link to comment Share on other sites More sharing options...
Lakesider Posted September 20, 2018 Share Posted September 20, 2018 This is a free resource. https://www.hellenicshippingnews.com/category/report-analysis/weekly-shipbrokers-reports/ Link to comment Share on other sites More sharing options...
whistlerbumps Posted September 20, 2018 Author Share Posted September 20, 2018 Thanks for sharing... Hellenic Shipping news is great... Link to comment Share on other sites More sharing options...
mjohn707 Posted September 21, 2018 Share Posted September 21, 2018 Yeah thanks for the link, will take a look Link to comment Share on other sites More sharing options...
oddballstocks Posted September 21, 2018 Share Posted September 21, 2018 Interesting story, do you have more details? What is NAV, is it compelling? How do peers trade? Why was it spun off. Seems like new investment ideas have gone from full blown ideas with a thesis and facts to "here's some random ticker with eight sentences, give me your notes." Not trying to be rude. I'm always in the market for new ideas, but I have no idea why I should look at this. Link to comment Share on other sites More sharing options...
mjohn707 Posted September 21, 2018 Share Posted September 21, 2018 Interesting story, do you have more details? What is NAV, is it compelling? How do peers trade? Why was it spun off. Seems like new investment ideas have gone from full blown ideas with a thesis and facts to "here's some random ticker with eight sentences, give me your notes." Not trying to be rude. I'm always in the market for new ideas, but I have no idea why I should look at this. I think that a random ticker without facts or a thesis perfectly describes my investing style actually Link to comment Share on other sites More sharing options...
whistlerbumps Posted September 21, 2018 Author Share Posted September 21, 2018 Interesting story, do you have more details? What is NAV, is it compelling? How do peers trade? Why was it spun off. Seems like new investment ideas have gone from full blown ideas with a thesis and facts to "here's some random ticker with eight sentences, give me your notes." Not trying to be rude. I'm always in the market for new ideas, but I have no idea why I should look at this. hahaha... fair enough.... Stock was spun off because the parent company didn't believe that they were getting credit for their shipping assets from South African investors. Thus, they wanted to split out the shipping assets and move them to an exchange that had more knowledgable shipping analysts... As GND Finance Director, Andrew Waller noted, the shipping business had a balance sheet value of R20 per GND share but GND was trading at R11 which suggested that something was wrong. He also noted that "We could easily have sold it (shipping) to someone, but we don't think selling shipping for $320m (listing valuation of $16.82 per GRIN share) is a very clever idea. We would rather our shareholders hold that share." So management set the listing value at $16.82 per share and thought that there would be greater value for shareholders holding the share instead of just selling the company and distributing the proceeds. Based on my own analysis with Clarkson's data and some changes in the balance sheet, I think current NAV is >$14. Most shipping companies trade near NAV unless there is some issue (corporate governance, excessive leverage etc). GRIN has a solid balance sheet and no corp gov concerns. Furthermore, I believe that dry bulk market is already tightening and the MR tanker market should tighten next year so NAV could increase as ship values increase. The company believes this as well and noted in the pre-listing statement "that dry bulk (upturn) has already started to happen and that tankers may move in 2019." As rates increase, GRIN should also generate significant EBITDA. Hope that helps. Happy to answer specific questions. Link to comment Share on other sites More sharing options...
gfp Posted September 25, 2018 Share Posted September 25, 2018 What just happened here with GRIN? Link to comment Share on other sites More sharing options...
whistlerbumps Posted September 25, 2018 Author Share Posted September 25, 2018 Not sure... its gone crazy before though... check out the trading on 8/20 Link to comment Share on other sites More sharing options...
rukawa Posted September 28, 2018 Share Posted September 28, 2018 The easiest way is to pay for data from Clarkson's....You can also get the Clarkson's data from a variety of sell side notes... the hardest way is to track ship purchase and sales.... How did you get the Clarkson's data? Link to comment Share on other sites More sharing options...
whistlerbumps Posted September 28, 2018 Author Share Posted September 28, 2018 from Clarksons... but as I mentioned, you can also get it out of industry notes from the sell side... Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted September 28, 2018 Share Posted September 28, 2018 After 15 minutes of work on this name: Trading @ ~50% of TBV. That's good. 1H 2018 results look pretty brutal. Only $2.4 million in gross profit? 1H 2017 results were better, but their gross profit still fell significantly short of covering G&A. I know they have another segment, but dry bulk shipping has historically been one of the (the?) worst industries to invest in. I think this is because the barriers to entry are very low. I'm not seeing a compelling reason to buy this. What am I missing? Link to comment Share on other sites More sharing options...
whistlerbumps Posted September 28, 2018 Author Share Posted September 28, 2018 This is certainly not a compounder or a great business.... whether dry bulk is a good investment depends on where we are in the cycle... with low orderbooks and IMO 2020 coming, I am personally bullish on the cycle but that's for each to decide on their own... Link to comment Share on other sites More sharing options...
whistlerbumps Posted October 8, 2018 Author Share Posted October 8, 2018 From seeking alpha post on GRIN today: Gross fleet value = $458.0 million less: total net debt = $200.0 million equal: Net asset value = $258.0 million divide by: total shares = 19.06 million equal: NAV per share = $13.53 per share Currently, the stock price of company is $7.20 or a 47% discount to this per share net asset value. Theoretically, if the company was to sell all of its ships, and repay all its liabilities, the owners would receive about $13.50 per share or a 80% return on the current share price. I have disregarded non-cash and non-vessel assets, and non-debt liabilities from this analysis. However, the net asset value would be higher if I had included them. As a test of reasonableness, the reported book equity of $302.4 million (or $15.87 per share) exceeds my NAV calculation. https://seekingalpha.com/article/4210446-grindrod-shipping-deep-value-ahead-imo-2020 Link to comment Share on other sites More sharing options...
mjohn707 Posted October 15, 2018 Share Posted October 15, 2018 From seeking alpha post on GRIN today: Gross fleet value = $458.0 million less: total net debt = $200.0 million equal: Net asset value = $258.0 million divide by: total shares = 19.06 million equal: NAV per share = $13.53 per share Currently, the stock price of company is $7.20 or a 47% discount to this per share net asset value. Theoretically, if the company was to sell all of its ships, and repay all its liabilities, the owners would receive about $13.50 per share or a 80% return on the current share price. I have disregarded non-cash and non-vessel assets, and non-debt liabilities from this analysis. However, the net asset value would be higher if I had included them. As a test of reasonableness, the reported book equity of $302.4 million (or $15.87 per share) exceeds my NAV calculation. https://seekingalpha.com/article/4210446-grindrod-shipping-deep-value-ahead-imo-2020 It was a really long 20-F, but I think you're right that it's decent at this price. I wasn't able to make heads or tails of the information from Hellenic Shipping News as far as the valuation of the boats and all go, but I think as a whole it all makes sense. Has some risks and all, but what doesn't. Appreciate the idea Link to comment Share on other sites More sharing options...
whistlerbumps Posted December 10, 2018 Author Share Posted December 10, 2018 Not sure if anyone has noticed by MR rates have gotten really hot recently. According to Jefferies, avg MR spot charter rate has increased to $22.9k from 6.3k in early Nov and GRIN's H1 TCE of 11.6k. Increases in rates drop pretty much directly to the bottom line so could have a material positive impact on GRIN EBITDA if this MR rate strength can continue. Link to comment Share on other sites More sharing options...
DeepValuePlay Posted December 10, 2018 Share Posted December 10, 2018 Not sure if anyone has noticed by MR rates have gotten really hot recently. According to Jefferies, avg MR spot charter rate has increased to $22.9k from 6.3k in early Nov and GRIN's H1 TCE of 11.6k. Increases in rates drop pretty much directly to the bottom line so could have a material positive impact on GRIN EBITDA if this MR rate strength can continue. Is the strength in rates only for the MR tankers? What about the handysize which are the majority of the vessels? Link to comment Share on other sites More sharing options...
whistlerbumps Posted December 10, 2018 Author Share Posted December 10, 2018 Supra's and handy's have been pretty stable... the reason why MRs matter though is that their market has been severely depressed and loss-making. This is the first sign of life for the MR market and it would be nice to have that division turn from loss-making to cash generating Link to comment Share on other sites More sharing options...
whistlerbumps Posted March 4, 2019 Author Share Posted March 4, 2019 GRIN H2 18 earnings had some positive developments. The company has exited its Leopard and Petrochem JVs which allows them to consolidate more of their ships and makes the financials much cleaner. They have also posted an revenue sensitivity which shows their potential upside from increases in rates. In the H2 deck (http://www.grinshipping.com/Content/EventsPresentationsAndNotices),you can see that the company would generate an incremental ~$125mln of revenues if rates increased by 10k. Given that these increased revenues would drop almost straight to the bottom line, the impact on EBITDA would be massive for a company with a ~200mln EV. If MR and bulk rates pick up due to IMO 2020, GRIN's earnings could explode and the stock could have material upside. Link to comment Share on other sites More sharing options...
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