While to some this may appear overly optimistic, other analysis seems to support their ideas. Dan Barcelo, Pierre Sargeant and Philippe Lanier of Banc of America Securities, in an energy sector report, note that they expect sector momentum to remain positive as oil prices are suggested to average $47 in 2005. Oil production and demand remaining healthy are unequivocally good for the tanker sector, while they are also a positive indicator regarding global economic growth.
Analysts at Morgan Stanley, which also is serving as joint bookrunning manager on the Quintana deal, Mark MacLean, Ole Slorer and Akshay Soni issued what is probably this week’s most comprehensive outlook on world shipping with their commodity shipping industry report. In this report, the analysts addressed with healthy confidence concerns that have been piqued this week about both the tanker and the dry bulk sectors. Even while recently the dry bulk market has taken a turn for the worse and such experts as John Kartsonas of Citigroup Smith Barney have advised against investing in tanker stocks, the Morgan Stanley reports explains smoothly that the “world has been gripped in a mild China panic over recent weeks.” It goes on to say that, “the dry bulk market is pointing to some minor weakness, albeit from very high levels, and appears to reflect a degree of seasonality.”
While they note that the “global economy appears fragile” and that capesize dry bulk rates in particular are showing notable weakness, they attribute the rate change more to seasonal factors and note that chartering rates and chemical shipping rates “have remained surprisingly firm.” The analysts expect that the global economy and the closely linked global shipping industry may be slowing down, but show no signs of collapse. While rating the entire shipping sector as “In Line” with other sectors, MacLean, Slorer and Soni do view the sector as “modestly undervalued, with near term fundamentals pointing to a classic seasonal upturn.” They believe that “strong global incremental oil demand of 4 mbpd over the next two years coupled with a tight refinery market supporting continued increases in cross trade should ensure a continued tight and volatile tanker market while the combination of port congestion and a continued strong Chinese economy should support the dry bulk market.”
DVB sure throws a great party. The gang turned out in force to celebrate DVB’s five years of success in NYC. Wolfgang Driese, Chairman of the Board of DVB Bank, who knows how to give a good speech to a networking crowd, led the team from DVB, which also included Dagfinn Lunde, Sybren Hoekstra and Mr. Hoekstra’s NY team which just grows and grows. A crowd of owners and professionals did business and toasted DVB as the sun set outside the Sky Club atop the Met Life building. In attendance were Mike Hudner, the new treasurer of Crowley – Dan Warner, Ted Helms with Petrobras, Richard du Moulin and Mark Filanowski of Intrepid, Gary Vogel from VOC, Sean Durkin and Øivind Lorentzen with NFC, Seaspan’s Graham Porter, James Drakos of Groton Pacific, CIT’s Steve Serepca, Derick Betts, and Larry Rutkowski from Seward and Kissel, Poten and Partners out in numbers, Helaba’s Gerhard Winklmeier and a hundred others…congratulations.
Fortis Bank analyst Dan Barrett, for one, is still interested in tanker equities. He issued a report this week initiating Arlington Tankers with a Buy rating and a $25 price target. He believes that the tanker market will ease from current levels but remain strong throughout 2005, not returning to mid-cycle levels until 2006. As for Arlington in particular, the report is confident in the company’s modern fleet and long-term contracts, while Mr. Barrett is positive on the company’s estimated 2005 yield of 10.8%.
Jefferies analysts Magnus Fyhr and Douglas Mavrinac this week raised their price target on Nordic American Tanker Shipping to $46, but are maintaining a rating of Hold. The analysts believe tanker demand is firming on increasing OPEC production, but are also lowering 2005 EPS estimates for NATS due to 1Q05 results that were below expectations on non-cash G&A expenses.
CP Ships announced this week that it has acquired Borg International Freight Services, Inc., a Montreal-based ocean and air freight forwarding company. While Borg’s 2004 revenue is reported to be in the realm of $14 million, terms were not disclosed. The acquisition came amidst market speculation that China Shipping Group has been preparing a hostile $1.2 billion takeover bid for the liner company.
Prior to this news, UBS Investment Research issued a report calling CP Ships’ risk/reward picture unattractive despite firm rates, noting that the company is priced at a premium to comparables.
Rumor has it that Star Cruises is looking to list subsidiary NCL to raise as much as $250 million, though the company denies that it has plans to do this by the yearend. If the deal does materialize, we expect that JP Morgan, who has raised immeasurable amounts of capital at very key times for the company, will probably be the underwriter.
The Teekay LNG deal is further evidence of the fact that companies that own Master Limited Partnership qualifying assets can achieve phenomenal valuations in the public markets. We estimate that the Teekay deal was priced at an incredible 12.5x 2005 EBITDA. Although the initial yield was 7.50% based on pricing of $22, the yield tightened to 6.5% as the stock traded up 13% to nearly $24. What was also clear from the transaction is the fact that MLP investors are looking at pipelines as their comparables and not other “shipping” companies. This transaction is exactly what we like to see: a great deal for Teekay that is also a great deal for investors.
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Freshly Minted | May 5th, 2005 |
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In this section, we hear from three very different, very important nations where the shipping markets are still developing their ties to the international financial markets. First is a speech from Chairman Gao of Hebei Ocean Shipping, which owns a steadily growing 40-ship fleet, 23 of which have been purchased since the beginning of 2004. This speech discusses the need that the rapidly developing shipping industry in China has for greater access to capital, both domestic and international. Chairman Gao calls on international financiers to reach out to the Chinese ship finance market and strengthen their presence, while he calls on Chinese shipowners to collectively build up their reputation and credibility to allow them to better utilize international financial opportunities.
Next is a speech from Turkish Minister of Transport and Communications Binali Yildirim, which was delivered at Marine Money’s wildly successful Turkish Ship Finance Forum. The comments emphasize the need for Turkish legislation that is more conducive to business from international ship financiers and acknowledge the need for a specialized bank to provide the type of financial services shipping- related companies in Turkey are generally lacking. Continue Reading
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Marine Money | May 1st, 2005 |
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By Gao Yanming, Chairman of Hebei Ocean Shipping Co., Ltd.
As Chairman of Hebei Ocean Shipping Co., Ltd., Gao Yanming has overseen a meteoric rise in the company’s fortunes over the last seven years. Hebei, or HOSCO, went from a fleet of only 64,000 dwt, which was on the verge of bankruptcy when Mr. Gao was appointed as General Manager in 1998, to a rising star with over 5.1 million dwt, having grown by 23 ships in 2004 and 2005 alone. (In fact, you may notice that HOSCO’s fleet is growing so rapidly that the numbers have changed since the time of this speech.) To fund such rapid expansion, it is only logical that Mr. Gao should know a thing or two about relationships between the international capital markets and Chinese shipping companies. This speech was given at Shipping China – 2005, Shanghai.
As you all know, the shipping industry is highly capital-intensive. To achieve its rapid growth in China, one of the challenges has been to have effective financing solutions available. While we have access to the resources of domestic Chinese capital, we China’s shipowners should make more efforts to utilize international capital to prompt our expansion. Continue Reading
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Marine Money | May 1st, 2005 |
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By Nora Huvane
Remember when a shipping IPO used to be headline news for weeks? Now there is a new one every day of the week, it seems, and they come in all shapes and sizes. Private equity sponsors, long-time owners, asset spin-offs, rapid-growth hopefuls – it seems there is something for everybody on Wall Street these days. Or, perhaps more appropriately, in midtown, as the Nasdaq is rapidly becoming the exchange of choice for many of the small or newly formed shipping companies coming to market that are outside of the NYSE’s more established financial thresholds.
For those of you who may have missed a day of news and still want to know what is going on in the wonderful world of shipping equity, we have compiled “cheat sheets” on the five IPOs that have either filed or priced since we went to press last month. Keep an eye on Freshly Minted for more regular updates. Continue Reading
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Marine Money | May 1st, 2005 |
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