Guest JoelS Posted December 13, 2014 Share Posted December 13, 2014 My thinking with commodity companies is to invest in those run by survivors. Any thoughts on why Friedriksen of Frontline is shifting away from commodity and dry bulk? Link to comment Share on other sites More sharing options...
orion Posted January 9, 2015 Share Posted January 9, 2015 STAR BULK CARRIERS CORP. ANNOUNCES UPSIZING & PRICING OF PRIMARY PUBLIC OFFERING OF 49,000,418 COMMON SHARES http://www.starbulk.com/UserFiles/sblk010915.pdf Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted January 21, 2015 Share Posted January 21, 2015 STAR BULK CARRIERS CORP. ANNOUNCES UPSIZING & PRICING OF PRIMARY PUBLIC OFFERING OF 49,000,418 COMMON SHARES http://www.starbulk.com/UserFiles/sblk010915.pdf I re-iterate my prior post. I wish these companies would use a little cash on hand to slowly repurchase shares when they trade at these levels instead of empire building and issuing debt/equity to buy more ships... The main reason I picked up SBLK is because I'm hoping Oaktree can pressure them, as necessary to make smart capital allocation decisions that would leverage an industry turn around and the impact on its shares. It's odd to me that even after 5 years of oversupply that companies were still issuing debt/equity to order more new builds then they were scrapping... goes to show that the incentives are wrong for the industry to behave as a whole. It's disappointing to see them issue a ton of stock at $5 just months after trading at $15 and not issuing anything. Industry supply is still a concern and rates may not turn around for a long while...yet the company is still issuing equity at extremely low prices to purchase more ships to increase that supply. They're already going to be the largest in an industry that encourages overinvestment. Do they really need even more ships? I noticed that Oaktree participated and purchased 75% of the offering. I wonder what they see that made them double down on an issuance at such low prices? Maybe simply trying to prevent dilution or do they really believe this is a good move? Price is down nearly 20% from the offering price in just a matter of days! Link to comment Share on other sites More sharing options...
DTEJD1997 Posted January 27, 2015 Share Posted January 27, 2015 Hey all: Anybody else looking at this? I am tempted if I can get in below $4. The offering was at $5, so if you get in at $4 or below, you've got a 20% discount. These guys were supposed to be good operators, but building more ships does NOT look a good idea. Getting in below $4 looks tempting though... Any thoughts? Link to comment Share on other sites More sharing options...
yadayada Posted January 27, 2015 Author Share Posted January 27, 2015 yeah by my calcs OCF will be like 2-3x the market cap even if rates are low and ships are delivered. But im not too optimistic on the dry bulk market really. Im going to wait untill they trade at bargain basement levels. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted February 23, 2015 Share Posted February 23, 2015 Does anybody have some good resources on recent bulker sales or how to determine the scrap value of a ship? I had found the below article that lists several sales in 2014 but it's hard for me to adjust for size/age differences to be able to work out comparable valuations for the shippers I'm looking at. It's also hard to say if the prices are representative of the market of if the buyer just got a good deal given that there is only a transaction or two for some of these ships sizes. https://shipbrokerage.wordpress.com/2015/02/15/sp-newbuilding-and-demolition-update-february-14th-2015-dry-bulk-market-focus/ I'm simply trying to work out a better method of valuing these ships without having to make my own assumptions on the future rates/earnings power of each. It'd be nice to have a somewhat reliable way of determining what the liquidation value to know where the companies trade relative to this amount. Link to comment Share on other sites More sharing options...
rb Posted February 23, 2015 Share Posted February 23, 2015 Does anybody have some good resources on recent bulker sales or how to determine the scrap value of a ship? I had found the below article that lists several sales in 2014 but it's hard for me to adjust for size/age differences to be able to work out comparable valuations for the shippers I'm looking at. It's also hard to say if the prices are representative of the market of if the buyer just got a good deal given that there is only a transaction or two for some of these ships sizes. I'm simply trying to work out a better method of valuing these ships without having to make my own assumptions on the future rates/earnings power of each. It'd be nice to have a somewhat reliable way of determining what the liquidation value to know where the companies trade relative to this amount. Hi, I don't know if this is much help. I don't have resources for ship transactions because most of them are not public. For the scrap value of a ship though I would just do scrap value of steel x weight. One thing I want to point out is that there are new emission regulations coming in soon so the number of ships being scrapped will increase vs the past as companies renew their fleets to comply. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted February 23, 2015 Share Posted February 23, 2015 Does anybody have some good resources on recent bulker sales or how to determine the scrap value of a ship? I had found the below article that lists several sales in 2014 but it's hard for me to adjust for size/age differences to be able to work out comparable valuations for the shippers I'm looking at. It's also hard to say if the prices are representative of the market of if the buyer just got a good deal given that there is only a transaction or two for some of these ships sizes. I'm simply trying to work out a better method of valuing these ships without having to make my own assumptions on the future rates/earnings power of each. It'd be nice to have a somewhat reliable way of determining what the liquidation value to know where the companies trade relative to this amount. Hi, I don't know if this is much help. I don't have resources for ship transactions because most of them are not public. For the scrap value of a ship though I would just do scrap value of steel x weight. One thing I want to point out is that there are new emission regulations coming in soon so the number of ships being scrapped will increase vs the past as companies renew their fleets to comply. How does one determine the weight of a ship? The DWT figures that are always reported are the carrying capacity of the ship - not it's weight in steel. I don't think you can simply use steel prices because I'm sure that scrap steal would sell at a discount to new steel and I'm also sure there is some discount applied to dismantle and melt down the ship. I don't know if you can count on those regulations to force scrapping - scrapping has been occurring at record levels since 2011 but wasn't enough to offset new orders. The fleet is young which doesn't bode well for the scrapping trend to continue. See the below fleet figures as reported by Pacific Basin in mid-2014. Handysize - avg. age of 10 years, 4% scrapping per year, 13% of fleet over 25 years old, order book is currently 23% of fleet. Handymax - avg. age of 8 years, 2% scrapping per year, 5% of fleet over 25 years old, order book is currently 28% of fleet. Post/Panamax - avg. age of 8 years, 1% scrapping per year, 2% of fleet over 25 years old, order book is currently 19% of fleet. Capesize - avg. age of 8 years, 2% of scrapping per year, 1% of fleet over 25 years old, order book is currently 24% of fleet. Total avg. age of 9 years, 2% scrapping per year, 4% of fleet over 25 years old, order book is currently 23% of fleet. As you can see, the average age of the fleet is now quite young with a LONG way to go to ages 20-25 where most ships are scrapped. Maybe 10% at most would be forced to be scrapped and it's more than offset by current slack capacity (all ships are slow steaming) and there's set to be another 23% increase in supply over the next 2 years or so. I don't think this is going to be rate relief you were hoping for. 2015/2016 will be the first years where the forecasted supply may actually undershoot forecasted demand in a long time. Both are expected to be around 4-6% depending on your source. The slowdown in China may have thrown a wrench into those demand expectations and further ship deliveries will continue to pressure rates if this is the case. I'm not making a forecast - I'm just trying to make sure that I'm good in the event rates remain low for another 3 years because the recovery has been elusive every year that it's been predicted so far. Link to comment Share on other sites More sharing options...
rb Posted February 23, 2015 Share Posted February 23, 2015 You seem to be way ahead of me on this co. But scrap value is an estimate, so you can make some conservative assumptions there. Scrap steel prices are semi-public, should not be hard to get. For the weight of a ship, you can get it by making some assumptions on the density of cargo which will lead to surface area of the ship then multiply by the thickness and density of steel should yield and approximate weight for the ship. For more information of vessels, scrap rates, and generally everything going on with the shipping industry, as very good resource for tons of info is UNCTAD's annual Review of Maritime Transport report. The last one to contain information on the used vessel market is the 2011 report. To get these just type into google Unactad review of maritime transport "year" pdf. I agree 100% that China is the wild card in bulk shipping. Link to comment Share on other sites More sharing options...
philly value Posted March 1, 2015 Share Posted March 1, 2015 I'm just starting to look into SBLK. For those that have looked at this in more detail, is it fair to say the potential for fuel costs to remain low going forward is a risk to consider? I'm thinking about this on two angles, one being that the strategy of slow steaming in order to save fuel costs may no longer make sense if fuel prices stay very low. Increased speeds would effectively result in an immediate increase in industry supply. Also, the 34 ships that SBLK is borrowing heavily to build are supposed to be highly fuel efficient. It seems the advantage of these new ships over existing fleets is reduced if fuel costs are low. Link to comment Share on other sites More sharing options...
yadayada Posted March 1, 2015 Author Share Posted March 1, 2015 It will be reflected in higher dayrates. Given that bunker prices are cut in half, it is still a sizable amount. ANd reading some of those latest quarterly call transcripts, it does not seem to be that they are abandoning slow steaming yet. What could be interesting for this name is their lower cost because of scale. I wonder how much that is? Seems they can load their ships more efficiently, and have lower fixed costs per ship? Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted March 11, 2015 Share Posted March 11, 2015 Does anybody have some good resources on recent bulker sales or how to determine the scrap value of a ship? I had found the below article that lists several sales in 2014 but it's hard for me to adjust for size/age differences to be able to work out comparable valuations for the shippers I'm looking at. It's also hard to say if the prices are representative of the market of if the buyer just got a good deal given that there is only a transaction or two for some of these ships sizes. https://shipbrokerage.wordpress.com/2015/02/15/sp-newbuilding-and-demolition-update-february-14th-2015-dry-bulk-market-focus/ I'm simply trying to work out a better method of valuing these ships without having to make my own assumptions on the future rates/earnings power of each. It'd be nice to have a somewhat reliable way of determining what the liquidation value to know where the companies trade relative to this amount. Just bubbling my above question back to the surface. The stock is down an additional 20% since I first asked. I'm getting anxious to pounce and have a gut feeling these valuations are low relative to their assets, but I'm trying to find a way to come up with a worst case scenario that doesn't rely on the asset values as reported by the company. Link to comment Share on other sites More sharing options...
philly value Posted March 11, 2015 Share Posted March 11, 2015 I have SBLK on the list of things I want to look at carefully but haven't gotten to yet. In terms of valuation estimates and other information, there are several industry sources such as Marsoft and Clarksons, but these would not be accessible to individual investors. There is, however, a treasure trove of industry data and examples of valuation analysis freely available since there have been so many bankruptcies in the space. Inevitably these bankruptcies will involve arguments about valuation, and require various advisors to testify and defend their analysis. I think reading through some of these is likely to be helpful. For example, in the case of Genco this past summer: (1) Testimony in support of Debtor's plan [defending a lower valuation]: http://gencorestructuring.com/pdflib/309_11108.pdf http://gencorestructuring.com/pdflib/308_11108.pdf (2) Testimony in support of equity group [defending a higher valuation]: http://gencorestructuring.com/pdflib/306_11108.pdf http://gencorestructuring.com/pdflib/307_11108.pdf Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted March 17, 2015 Share Posted March 17, 2015 Just curious how many of you are still bullish and still buying after the 80% decline in the last 6 months? I've been accumulating a small position in this and other bulkers on the way down. Still trying to figure out a way to get comfortable with a value to move in a big way, but just curious how many of you are still buying after the carnage... Link to comment Share on other sites More sharing options...
yadayada Posted March 17, 2015 Author Share Posted March 17, 2015 im staying out. I think with a China slowdown (which seems to be happening as of now) you could see very low dayrates for a year or two, since ships are not likely to exit the market. And a lot of dry bulk shippers still seem too optimistic. I think they can go lower then this even. Ill be buying when they trade at less then 1x OCF. It seems SBLK is the way to go though if you buy any now. Link to comment Share on other sites More sharing options...
undervalued Posted March 17, 2015 Share Posted March 17, 2015 per yahoo finance, P/B value is currently .29 and .39 for SBLK and SB. Are these book values pretty accurate? They're cheap. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted March 17, 2015 Share Posted March 17, 2015 per yahoo finance, P/B value is currently .29 and .39 for SBLK and SB. Are these book values pretty accurate? They're cheap. The book value will fluctuate with the NAV of their ships - their largest asset. The NAV will fluctuate with expectations of rates over the life of the ship. These numbers are not accurate and simply list the assets at their purchase price less depreciation. Link to comment Share on other sites More sharing options...
60North Investments Posted March 18, 2015 Share Posted March 18, 2015 Just curious how many of you are still bullish and still buying after the 80% decline in the last 6 months? I've been accumulating a small position in this and other bulkers on the way down. Still trying to figure out a way to get comfortable with a value to move in a big way, but just curious how many of you are still buying after the carnage... I haven't looked at SBLK but I've been riding it all the way down with GLBS (Globus Maritime), yesterday it came down 20%. The CEO said in an interview that they'd refinance most likely within Q1, so that'd be within the next couple of weeks. Very curious whether that is going to happen. Debt/EBITDA after Q4 (will be released within a month I suppose) probably bit below 7. No clue whether they will be able to refinance the 2015 debt payments. With $12m mcap and $78.3m net debt (after Q4 probably $75.5m), $10m annual FCF to repay more debt and one ship-on-sale (currently in balance sheet at $9.6m) it would seem like equity holders would be alright IF they refinance. What kind of EV/FCF multiples are reasonable for these companies though? If there isn't a risk of BK in sight I suppose 6-8 EV/FCF is quite fair for a small company? Getting a lesson on leveraged companies in commodity industries though, luckily not a huge position. Link to comment Share on other sites More sharing options...
philly value Posted March 18, 2015 Share Posted March 18, 2015 Just curious how many of you are still bullish and still buying after the 80% decline in the last 6 months? I've been accumulating a small position in this and other bulkers on the way down. Still trying to figure out a way to get comfortable with a value to move in a big way, but just curious how many of you are still buying after the carnage... I haven't looked at SBLK but I've been riding it all the way down with GLBS (Globus Maritime), yesterday it came down 20%. The CEO said in an interview that they'd refinance most likely within Q1, so that'd be within the next couple of weeks. Very curious whether that is going to happen. Debt/EBITDA after Q4 (will be released within a month I suppose) probably bit below 7. No clue whether they will be able to refinance the 2015 debt payments. With $12m mcap and $78.3m net debt (after Q4 probably $75.5m), $10m annual FCF to repay more debt and one ship-on-sale (currently in balance sheet at $9.6m) it would seem like equity holders would be alright IF they refinance. What kind of EV/FCF multiples are reasonable for these companies though? If there isn't a risk of BK in sight I suppose 6-8 EV/FCF is quite fair for a small company? Getting a lesson on leveraged companies in commodity industries though, luckily not a huge position. Earnings and cash flow multiples basically are not very useful in dry bulk shipping. Depending on how the ships are chartered, EBITDA could vary drastically from year to year. For some of these companies earnings and cash flow may overstate their health if they have long-term charters in place from back when rates were higher. But when those expire, they'd be unable to charter for anywhere near the same rate. The argument the debtors made in Genco (I linked the bankruptcy docs in a post on the last page) is that the only way to value a commodity shipping business is NAV. For M&A transactions within the industry, NAV is the standard metric and moreover, many companies actually are sold or trade at slightly below NAV. Nobody is willing to pay for management expertise / etc, buyers just look at the price similar ships could sell for. So basically the way that I get that you should value these companies is to add up the market value of the ships, then add any excess assets. Above-market long term charters would be an excess asset if they have them. Then for equity subtract all the debt. The problem of course is getting a good idea of the market value of ships as a small investor. That's what is keeping me out for now. And even looking a year or two ago may be misleading because it seems ship prices have continued to go down. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted March 20, 2015 Share Posted March 20, 2015 http://www.marketwatch.com/story/star-bulk-carriers-corp-reports-results-for-the-fourth-quarter-and-year-ended-december-31-2014-and-provides-update-on-financing-and-sale-of-vessels-2015-03-19 Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted May 13, 2015 Share Posted May 13, 2015 STAR BULK CARRIERS CORP. ANNOUNCES UPSIZING & PRICING OF PRIMARY PUBLIC OFFERING OF 49,000,418 COMMON SHARES http://www.starbulk.com/UserFiles/sblk010915.pdf I re-iterate my prior post. I wish these companies would use a little cash on hand to slowly repurchase shares when they trade at these levels instead of empire building and issuing debt/equity to buy more ships... The main reason I picked up SBLK is because I'm hoping Oaktree can pressure them, as necessary to make smart capital allocation decisions that would leverage an industry turn around and the impact on its shares. It's odd to me that even after 5 years of oversupply that companies were still issuing debt/equity to order more new builds then they were scrapping... goes to show that the incentives are wrong for the industry to behave as a whole. It's disappointing to see them issue a ton of stock at $5 just months after trading at $15 and not issuing anything. Industry supply is still a concern and rates may not turn around for a long while...yet the company is still issuing equity at extremely low prices to purchase more ships to increase that supply. They're already going to be the largest in an industry that encourages overinvestment. Do they really need even more ships? I noticed that Oaktree participated and purchased 75% of the offering. I wonder what they see that made them double down on an issuance at such low prices? Maybe simply trying to prevent dilution or do they really believe this is a good move? Price is down nearly 20% from the offering price in just a matter of days! http://www.marketwatch.com/story/star-bulk-carriers-corp-announces-upsizing-pricing-of-primary-public-offering-of-56250000-common-shares-2015-05-13 Another massively dilutive issuance. "Hey, our shares trade at $15 and we need a lot of capital for newbuilds and debt-reduction, should we issue shares? Nah, let's wait 6 months for the shares to trade at $3 and $5 to do the issuance then..." Link to comment Share on other sites More sharing options...
rsmehta Posted May 13, 2015 Share Posted May 13, 2015 Howard Marks in his books, blogs is the polar opposite of Oaktree investment decision process for SBLK. It's a total head-scratcher.... :-\ :-\ Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted January 6, 2016 Share Posted January 6, 2016 http://splash247.com/star-bulk-offloads-four-capesize-newbuilds/ Starbulk sells 4 capesize newbuilds for $151M. It's hard for me to tell how much of a bath they took on these, but it seems like they were discounted a bit. Two of the capesize vessles were purchased in 2013, along with two ultramaxes, for $148M. So, upgrading the two ultramaxes to capesize and selling them 2.5 years later results in a price increase of $3M. http://gcaptain.com/2013/07/11/star-bulk-capesize-newbuild-stx-pan-ocean/#.Vo2gK_krKBY Given that Capesizes are 2-3x the size of Ultramaxes, it seems like we a loss of 10s of millions across all 4. Also, obviously this isn't going to happen, but it seems like if there was an orderly sale of all their ships at current prices, shareholders would still likely make out like bandits. That's not going to happen and there will potentially be massive operational losses and heavy dilution, but at current prices you're getting most of the ships for free.... Link to comment Share on other sites More sharing options...
Guest MarkS Posted March 10, 2017 Share Posted March 10, 2017 Does anyone have any thoughts on the "baby bonds?" They're trading around $23.00 (par $25) with a yield of about 8.70% and a maturity date of 11/15/2019. You would have a nice yield plus potential cap gains with a short time frame. According to their last earnings transcript they have about 250 million in cash, including 50 million raised in a recent private placement for "insurance." They recently cut a deal with long term creditors pushing back interest payments and relaxing loan covenants. Finally, Deutsche Bank raised SBLK to a buy based on improving fundementals in the dry bulk market. The risk reward relationship seems pretty fair. What am I missing? Thanks Mark Link to comment Share on other sites More sharing options...
Haasje Posted March 13, 2017 Share Posted March 13, 2017 I don't really like bonds in shipping except for when you are betting it is going under and you'll end up with equity after restructuring. You want to have the open ended upside. Link to comment Share on other sites More sharing options...
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