Shipowners Present at Deutsche Small Cap Equity Conference
It’s no coincidence that investor conferences are being held in closer to the equator during these chilly months. This week, Deutsche Bank, which recently hired investment banker Craig Fuehrer from JP Morgan and veteran transportation analyst Jordan Alliger from Lazard (formerly with Goldman Sachs), held an event at the Ritz Carlton on the beach in Naples, Florida. Shipping companies that presented include: Kirby Corporation (NYSE: KEX), OMI (NYSE: OMM), General Maritime (NYSE: GMR), TEN (NYSE: TNP), Stolt Nielsen, S.A. (NASDAQ: SNSA) and Maritrans (NYSE: TUG). As you can see from the share price graphs for the last five days, with fundamentals as good as the shipping industry, it’s always a good idea for companies to get out on the road and tell their story to investors.
It’s no coincidence that investor conferences are being held in closer to the equator during these chilly months. This week, Deutsche Bank, which recently hired investment banker Craig Fuehrer from JP Morgan and veteran transportation analyst Jordan Alliger from Lazard (formerly with Goldman Sachs), held an event at the Ritz Carlton on the beach in Naples, Florida. Shipping companies that presented include: Kirby Corporation (NYSE: KEX), OMI (NYSE: OMM), General Maritime (NYSE: GMR), TEN (NYSE: TNP), Stolt Nielsen, S.A. (NASDAQ: SNSA) and Maritrans (NYSE: TUG). As you can see from the share price graphs for the last five days, with fundamentals as good as the shipping industry, it’s always a good idea for companies to get out on the road and tell their story to investors.
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carisk | Categories:
Forums,
Freshly Minted | February 17th, 2005 |
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Tropical JP Morgan High Yield Conference Attracts Snowbirds
JP Morgan hosted a phenomenally well-attended high yield conference at the Lowe’s Hotel on sultry South Beach in Miami Florida last week. Among the 300 hundred companies that presented at the enormous event were faithful JP Morgan shipping clients NCL, Stena and General Maritime – the former two of which issued bonds in 2004. Although most shipowners have been selling equity due to where we are in the cycle, the high yield market remains incredibly receptive to new issuers and should not be overlooked.
JP Morgan hosted a phenomenally well-attended high yield conference at the Lowe’s Hotel on sultry South Beach in Miami Florida last week. Among the 300 hundred companies that presented at the enormous event were faithful JP Morgan shipping clients NCL, Stena and General Maritime – the former two of which issued bonds in 2004. Although most shipowners have been selling equity due to where we are in the cycle, the high yield market remains incredibly receptive to new issuers and should not be overlooked.
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carisk | Categories:
Bonds,
Freshly Minted | February 10th, 2005 |
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Horizon Kicks Off IPO Process
We understand from market sources that Horizon has chosen its IPO underwriting team and kicked off the public offering process. We believe that Goldman Sachs and UBS are leads on the deal and Bear Stearns, JP Morgan and Deutsche Bank will serve as co managers. Depending on how the underwriters are able to value the company, we believe that Castle Harlan will sell a minority position for somewhere in the neighborhood of $200-$250 million. Look for the deal to come to market in the late spring/early summer.
We understand from market sources that Horizon has chosen its IPO underwriting team and kicked off the public offering process. We believe that Goldman Sachs and UBS are leads on the deal and Bear Stearns, JP Morgan and Deutsche Bank will serve as co managers. Depending on how the underwriters are able to value the company, we believe that Castle Harlan will sell a minority position for somewhere in the neighborhood of $200-$250 million. Look for the deal to come to market in the late spring/early summer.
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carisk | Categories:
Equity,
Freshly Minted | February 10th, 2005 |
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Is the Sky Falling in on Tanker Equities?
Is the sky falling in on the tanker market? That seems to be the question of the day. There are certainly those who would assert that it is, or is about to, as rapidly falling tanker stock prices and even more rapidly falling charter rates remind many of the barren shipping landscape of the 80s and parts of the 90s. Then there are those who would disagree and have drawn a very different conclusion based on their view of tanker market fundamentals. We thought it might be useful to take a look at these views and the opinions behind them as investors and operators recover from an ungraceful destruction of the tanker equities.
The Beginning of the End…?
Citigroup Smith Barney analyst John Kartsonas reports that dayrates for all classes of vessels have fallen by an average of more than 60% while Jefferies analyst Ray Wu reports that VLCC spot rates have fallen around 80% over the past eight weeks. JP Morgan analysts note that tanker stocks themselves have correspondingly fallen by 20-35%. An extrapolation of current trends would of course predict future devastation of the tanker industry, but fortunately these trends appear to be more of a temporary correction than an indicator of future rate and stock price falls.
Momentum vs. Value
In the first place, importantly, this sort of gargantuan drop was almost universally anticipated. No one thought the unprecedented rates and stock prices seen in November were sustainable. The question, rather, was when, how far, and how hard they would fall. OSG CEO Morten Arntzen exhibited this philosophy in his explanation to Bloomberg: “I never told anyone that the rates would stand at $200,000 a day. But I enjoyed it.” Savvy investors must have been able to identify with this sentiment in late autumn. JP Morgan analysts Jon Chappell, Gregory Burns and Hassan Malik noted that their 2005 projections, pre-the recent fall, had “already factored in seasonal declines, the impact of an OPEC production cut, and the belief that the November rate levels were not at all sustainable.” The difference between them and the more bearish Citigroup Smith Barney reports appears to have been more along the lines of how to prepare for and del with the dropping tanker market situation than over whether it would occur. So who were the investors that have moved suddenly and in droves to substantially more cautious tanker market positions?
The Chappell-Burns-Malik report argues that the recent massive drop in the tanker stocks represents “the exodus of a vast number of momentum investors,” to which the analysts attribute the tanker stocks’ “meteoric” rise and subsequent fall. Now that the stocks have come back down to earth, the JP Morgan analysts expect a return of the value investors. Indeed, Hibernia, who downgraded Top Tankers to a HOLD just as the stock tumble began in early December, has just upgraded the company back to a BUY, indicating they expected something of the recent fall and seem comfortable that the worst is over.
Citigroup and JP Morgan on Supply & Demand
The supply demand balance, is, naturally, also extremely important in determining the prospects for the tanker market’s health in 2005. The JP Morgan report looks for fleet expansion of 19.2 mdwt, or 5.9% capacity growth, in the coming year while Citigroup reports demonstrate comfort with a slightly higher growth number of around 21.5 mdwt, a growth rate of close to 7%. As the orderbook is a known number, discrepancies revolve more around scrapping expectations, largely involving how tanker companies will deal with the new IMO regulations set to come into effect in April of this year. In the demand arena, Citigroup’s Kartsonas expects growth of around 2% as compared to 7% this past year, with OPEC’s one mbpd production cut to reduce tanker demand by as much as 7-8 mdwt with a shift to less long-haul and more short-haul tonnage. OMI’s Robert Bugbee told Tradewinds that he expects demand to be stronger than this, pointing out factors such as China’s intent to build a strategic petroleum reserve that could easily raise demand by one mbpd. Also on the upside, the JP Morgan analysts used IEA forecasts to estimate tanker demand growth of 13.5 mdwt. This discrepancy seems to be largely geographic with respect to oil supply.
Material Gains
Yet another dispute revolves around whether shipping stocks are cheaply or expensively priced. Kartsonas notes their expense relative to historical levels while the JPM analysts note their cheapness relative to many other industries. You can look for yourself at their P/NAV ratings in the “Fair Value” table. As usual, the truth probably lies somewhere in the middle. While the extraordinary spot rates witnessed in the past few months may have dissipated, current rates are still comfortably above breakeven levels, which are estimated in the low $30Ks for a typical being above mid-cycle and even comparable to annual highs in more typical years as shown in “Rate Comparison” chart. Not only that, but this past boom has seen shipping companies increase transparency, modernize their accounting practices and begin to access whole new pools of capital, all of which contribute to lowering their cost of capital and increasing the opportunities for financing available to owners and operators.
The tanker companies are now seeing that not all their new supporters will stick around when the fad passes, but they have undoubtedly succeeded in raising their profile and increasing the breadth of their long-term support base. Just as importantly, the companies are continuing to demonstrate strong performance, in a far more sustainable fashion than before, and, as the JP Morgan trio pointed out, they offer the potential for share buybacks, dividend increases and consolidation.
Is the sky falling in on the tanker market? That seems to be the question of the day. There are certainly those who would assert that it is, or is about to, as rapidly falling tanker stock prices and even more rapidly falling charter rates remind many of the barren shipping landscape of the 80s and parts of the 90s. Then there are those who would disagree and have drawn a very different conclusion based on their view of tanker market fundamentals. We thought it might be useful to take a look at these views and the opinions behind them as investors and operators recover from an ungraceful destruction of the tanker equities.
The Beginning of the End…?
Citigroup Smith Barney analyst John Kartsonas reports that dayrates for all classes of vessels have fallen by an average of more than 60% while Jefferies analyst Ray Wu reports that VLCC spot rates have fallen around 80% over the past eight weeks. JP Morgan analysts note that tanker stocks themselves have correspondingly fallen by 20-35%. An extrapolation of current trends would of course predict future devastation of the tanker industry, but fortunately these trends appear to be more of a temporary correction than an indicator of future rate and stock price falls.
Momentum vs. Value
In the first place, importantly, this sort of gargantuan drop was almost universally anticipated. No one thought the unprecedented rates and stock prices seen in November were sustainable. The question, rather, was when, how far, and how hard they would fall. OSG CEO Morten Arntzen exhibited this philosophy in his explanation to Bloomberg: “I never told anyone that the rates would stand at $200,000 a day. But I enjoyed it.” Savvy investors must have been able to identify with this sentiment in late autumn. JP Morgan analysts Jon Chappell, Gregory Burns and Hassan Malik noted that their 2005 projections, pre-the recent fall, had “already factored in seasonal declines, the impact of an OPEC production cut, and the belief that the November rate levels were not at all sustainable.” The difference between them and the more bearish Citigroup Smith Barney reports appears to have been more along the lines of how to prepare for and del with the dropping tanker market situation than over whether it would occur. So who were the investors that have moved suddenly and in droves to substantially more cautious tanker market positions?
The Chappell-Burns-Malik report argues that the recent massive drop in the tanker stocks represents “the exodus of a vast number of momentum investors,” to which the analysts attribute the tanker stocks’ “meteoric” rise and subsequent fall. Now that the stocks have come back down to earth, the JP Morgan analysts expect a return of the value investors. Indeed, Hibernia, who downgraded Top Tankers to a HOLD just as the stock tumble began in early December, has just upgraded the company back to a BUY, indicating they expected something of the recent fall and seem comfortable that the worst is over.
Citigroup and JP Morgan on Supply & Demand
The supply demand balance, is, naturally, also extremely important in determining the prospects for the tanker market’s health in 2005. The JP Morgan report looks for fleet expansion of 19.2 mdwt, or 5.9% capacity growth, in the coming year while Citigroup reports demonstrate comfort with a slightly higher growth number of around 21.5 mdwt, a growth rate of close to 7%. As the orderbook is a known number, discrepancies revolve more around scrapping expectations, largely involving how tanker companies will deal with the new IMO regulations set to come into effect in April of this year. In the demand arena, Citigroup’s Kartsonas expects growth of around 2% as compared to 7% this past year, with OPEC’s one mbpd production cut to reduce tanker demand by as much as 7-8 mdwt with a shift to less long-haul and more short-haul tonnage. OMI’s Robert Bugbee told Tradewinds that he expects demand to be stronger than this, pointing out factors such as China’s intent to build a strategic petroleum reserve that could easily raise demand by one mbpd. Also on the upside, the JP Morgan analysts used IEA forecasts to estimate tanker demand growth of 13.5 mdwt. This discrepancy seems to be largely geographic with respect to oil supply.
Material Gains
Yet another dispute revolves around whether shipping stocks are cheaply or expensively priced. Kartsonas notes their expense relative to historical levels while the JPM analysts note their cheapness relative to many other industries. You can look for yourself at their P/NAV ratings in the “Fair Value” table. As usual, the truth probably lies somewhere in the middle. While the extraordinary spot rates witnessed in the past few months may have dissipated, current rates are still comfortably above breakeven levels, which are estimated in the low $30Ks for a typical being above mid-cycle and even comparable to annual highs in more typical years as shown in “Rate Comparison” chart. Not only that, but this past boom has seen shipping companies increase transparency, modernize their accounting practices and begin to access whole new pools of capital, all of which contribute to lowering their cost of capital and increasing the opportunities for financing available to owners and operators.
The tanker companies are now seeing that not all their new supporters will stick around when the fad passes, but they have undoubtedly succeeded in raising their profile and increasing the breadth of their long-term support base. Just as importantly, the companies are continuing to demonstrate strong performance, in a far more sustainable fashion than before, and, as the JP Morgan trio pointed out, they offer the potential for share buybacks, dividend increases and consolidation.
Written by:
carisk | Categories:
Freshly Minted,
Markets | January 6th, 2005 |
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By Urs M Dür
[The following is an updated version of what appeared in Freshly Minted May 1st 2003. The conclusions are similar, but new numbers were provided and added to shed even more light on this substantial deal. – ED]
Singapore listed Neptune Orient Lines (NOL) finally, after years of trying to divest itself of its profitable Atlantic basin tanker arm, sold American Eagle Tankers (AET) to Malaysia International Shipping Corp. (MISC) for a total of $1 ,02 billion in equity ($445m), dividend funding $75m) and assumption of debt ($500m according to sources at NOL). NOL, losing over $220m last year and levered 84% debt to book at the end of ’02 (far worse, needless to say, debt/NAV), needed to do something and by our estimation got a big premium for the AET assets even if one includes the goodwill and franchise value associated with AET, about 202% of NAV. We go over our estimates below.
JPMorgan, specifically Michael Borch, was financial advisor to NOL and Citibank to MISC. Both banks, while it appears at this stage that NOL got the better of the deal just as the Aframax market is going to get blasted with a 9% supply increase in a falling market, deserve a huge amount of credit for getting a deal, which many said was politically unfeasible especially as the Malaysian government, via Petronas, and the Singaporean authorities, Temasec, respectively controlling owners of MISC and NOL, are known political rivals not usually willing to cut each other some slack. Really, bravo to both banks.
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carisk | Categories:
Marine Money | May 1st, 2003 |
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“It is the rare item that inspires a bargain hunter to pay a premium. That’s why when CP Ships, whose very identity is defined by buying out-of-favor companies on the cheap, marched up to the Wall Street counter and ordered $200m worth of bonds yielding 10.75%, the ship finance industry was momentarily in shock.”Marine Money, June 2002
Like all capital markets, the public debt market opens and closes as unpredictably and as inexplicably as the shipping markets rise and fall. As one bond underwriter in New York said, “the high yield bond market is only about twice a year, so companies need to be ready and execution needs to be perfect.”
Although slipping gracefully through an open window, as JP Morgan did for Stena and Morgan Stanley did for Seacor, is a pretty thought, the reality is that the capital needs of companies generally don’t coincide with the few and fleeting moments that the bond window is open. This scenario sometimes leaves issuers with an unfortunate task – jumping through a closed window, and hoping they don’t get too bloodied along the way. That’s exactly what happened in the case of thisyear’s award winner.
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By Urs Dür and Matt McCleery
Before we oil-up the HP and get into the math, we’d just like to say up front that the role of Marine Money is a complicated one because shipowners, investors and financiers all rely on us, yet their interests are often mutually exclusive. Unlike a typical sell-side analyst report, we have to use three distinct perspectives when conducting our analysis. That means that in the perfect world, we would probably write four short articles on TEN and every other deal; what it means to the Tsakos family, what it means to JP Morgan and Jefferies and the other underwriters, what it means to the investors – and of course what the sum of these three things mean to the marketplace as whole. The following analysis is focused on what we think investors should look for when investing in tanker offerings, but we’ll start off by telling you what Marine Money thinks this transaction means for the issuer and underwriters. Unlike most articles in Marine Money, we won’t divulge our overall conclusion until the end. Continue Reading
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carisk | Categories:
Uncategorized | March 1st, 2002 |
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