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Hellenic Norwegian Confab
For the fifteenth year, the Hellenic-American and Norwegian-American Chambers of Commerce presented their Annual Joint Shipping Conference posing the question of “How Will Shipping Survive the Perfect Storm?” Whether the question was answered or not, attendees were able to garner lots of insights into what happened and what may happen in the future. Once again, the following will highlight what we found of particular interest.
Arlie Sterling of Marsoft provided insights into “what happened” and “what might happen.” The industry did well based upon an explosion in trade and demand and yard capacity limits. The chart below lays out the extraordinary growth.
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Written by: carisk | Categories: Freshly Minted, The Week in Review | February 12th, 2009 | Add a Comment
DnB NOR Chief Bullish Expansion Set – Lending Grows
It is always a pleasure to hear from someone with a fresh and confident outlook, and such was the happy occasion when the Norwegian American Chamber of Commerce presented Rune Bjerke the Group Chief Executive of DnB NOR at an early evening, late summer event in New York. Mr. Bjerke joined the Bank leaving the successful Hafslund ASA where he was CEO. And as he noted the switch to banking left some of his friends perplexed it was the sort of challenge that appealed even though his start date approximately coincided with the start of the Sub Prime crisis.
Written by: carisk | Categories: Freshly Minted, Market Commentary | August 21st, 2008 | Add a Comment
Morgan Stanley Confident in Commodity Shipping Sector
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.”
Morgan Stanley Downgrades Energy Shipping, Remains Optimistic About Future
Morgan Stanley Downgrades Energy Shipping,
Remains Optimistic About Future
Morgan Stanley analysts Mark MacLean and Ole Slorer have been keeping a close watch on the US-listed tanker market lately. They caught a lot of people’s attention when they lowered their energy shipping Industry View from Attractive to In-line and lowered their recommendation on General Maritime from Overweight-V to Equal Weight. While Tradewinds notes that the analysts are concerned about factors like the decline in valuation for single-hull tankers, we understand that Mr. Slorer and Mr. MacLean believe that tanker stocks have only taken a run up in line with improving fundamentals in their market. The two recommend in their report that investors “lock in” the profits they can get off the latest run, as strong fourth quarter results are released, and look for a “better entry point in April-May.” Additionally, General Maritime, whose stock price was at $49.60 when the report was published, had reached within range of the $53.00 price target the Morgan Stanley analysts set when the company first announced its new dividend policy, so a re-rating to Equal Wight seems fairly natural.Morgan Stanley Downgrades Energy Shipping,
Remains Optimistic About Future
Morgan Stanley analysts Mark MacLean and Ole Slorer have been keeping a close watch on the US-listed tanker market lately. They caught a lot of people’s attention when they lowered their energy shipping Industry View from Attractive to In-line and lowered their recommendation on General Maritime from Overweight-V to Equal Weight. While Tradewinds notes that the analysts are concerned about factors like the decline in valuation for single-hull tankers, we understand that Mr. Slorer and Mr. MacLean believe that tanker stocks have only taken a run up in line with improving fundamentals in their market. The two recommend in their report that investors “lock in” the profits they can get off the latest run, as strong fourth quarter results are released, and look for a “better entry point in April-May.” Additionally, General Maritime, whose stock price was at $49.60 when the report was published, had reached within range of the $53.00 price target the Morgan Stanley analysts set when the company first announced its new dividend policy, so a re-rating to Equal Wight seems fairly natural.
Morgan Stanley analysts Mark MacLean and Ole Slorer have been keeping a close watch on the US-listed tanker market lately. They caught a lot of people’s attention when they lowered their energy shipping Industry View from Attractive to In-line and lowered their recommendation on General Maritime from Overweight-V to Equal Weight. While Tradewinds notes that the analysts are concerned about factors like the decline in valuation for single-hull tankers, we understand that Mr. Slorer and Mr. MacLean believe that tanker stocks have only taken a run up in line with improving fundamentals in their market. The two recommend in their report that investors “lock in” the profits they can get off the latest run, as strong fourth quarter results are released, and look for a “better entry point in April-May.” Additionally, General Maritime, whose stock price was at $49.60 when the report was published, had reached within range of the $53.00 price target the Morgan Stanley analysts set when the company first announced its new dividend policy, so a re-rating to Equal Wight seems fairly natural.
Written by: carisk | Categories: Freshly Minted, Market Commentary | February 17th, 2005 | Add a Comment
Morgan Stanley Upgrades Tanker Sector
Morgan Stanley Upgrades Tanker Sector
Just four days after upgrading General Maritime Corporation to Overweight-V on the announcement of its new dividend policy, Morgan Stanley analysts Mark MacLean and Ole Slorer issued a report revamping their formerly bearish view on the tanker market and raising their industry view to Attractive. This, of course, is good news for tanker companies and their shareholders, but we thought we would take a closer look at what is behind their change of heart.
OPEC Passes on Production Cut, Demand
Forecasts Improve
We looked back just as far as Mr. MacLean’s much more cautious forecast for the tanker market in 2005 published in the January issue of Marine Money, and we were reminded yet again of just how volatile the tanker industry really is. In both the earlier report and the more recent one, near-term fundamentals were classified as strong and concerns about OPEC production cuts were iterated. Since December, a 1.0 mbpd OPEC production cut effective as of January 1, 2005 did not have any particularly deleterious effects, while an OPEC meeting held on January 30 confirmed that OPEC did not feel it was necessary to cut production again at this time. Both these factors improved the outlook for the demand side of the equation.
Also in Mr. MacLean’s earlier forecast, an expansion of supply in the realm of 2.0 mdwt was predicted, to be met by an expansion of demand of 1.5 mbpd. In their more recent report, however, the two Morgan Stanley analysts raised their demand forecast to 1.7 mbpd after this week’s OPEC meeting, noting that at 2.0 mbpd the markets would be balanced and an increase to 2.6 mbpd, as seen last year, would see the market “positively booming.” These numbers do leave room for some notable upside potential in freight rates, which helps explain the 15-20% composite upside potential in the General Maritime, OMI, OSG, and Teekay stocks the analysts cover.
Beyond Supply & Demand: Stronger Asset Values,
Hopes for More Dividends
However, it does not appear to be just the numbers that underlie the analysts’ new bullish view. Whereas the earlier analysis focused primarily on the supply-demand balance, the newer one is broader in focus, considering fundamental changes in the tanker companies covered and in the tanker industry. While this sort of qualitative analysis is, to a certain extent, less scientific, it has the advantage that it is less affected by relatively minor differences (i.e. scrapping estimates, oil demand estimates) and so has the potential to be somewhat more consistent in the face of changing forecasts for supply and demand.
In their most recent report, Mr. Slorer and Mr. MacLean note the increased support for net asset values lent by increases in both newbuilding and secondhand prices and by strong balance sheets that are only being further strengthened by record 4Q04 earnings. As cash becomes slightly less dear to companies, they are willing to spend more on investments for the future, pushing up asset prices and even the monetary value of their own companies.
Perhaps more interesting is the temporary positive externality General Maritime seems to have created with the announcement of its new dividend policy. Far from boosting its own stock price at the expense of the other tanker companies, it has actually moved the Morgan Stanley analysts to become more bullish on General Maritime’s competitors, because they expect the change in policy will put pressure on the other U.S.-listed tanker companies to follow suit as the “valuation bifurcation of high yielding stocks” is brought into relief.
Just four days after upgrading General Maritime Corporation to Overweight-V on the announcement of its new dividend policy, Morgan Stanley analysts Mark MacLean and Ole Slorer issued a report revamping their formerly bearish view on the tanker market and raising their industry view to Attractive. This, of course, is good news for tanker companies and their shareholders, but we thought we would take a closer look at what is behind their change of heart.
OPEC Passes on Production Cut, Demand Forecasts Improve
We looked back just as far as Mr. MacLean’s much more cautious forecast for the tanker market in 2005 published in the January issue of Marine Money, and we were reminded yet again of just how volatile the tanker industry really is. In both the earlier report and the more recent one, near-term fundamentals were classified as strong and concerns about OPEC production cuts were iterated. Since December, a 1.0 mbpd OPEC production cut effective as of January 1, 2005 did not have any particularly deleterious effects, while an OPEC meeting held on January 30 confirmed that OPEC did not feel it was necessary to cut production again at this time. Both these factors improved the outlook for the demand side of the equation.
Also in Mr. MacLean’s earlier forecast, an expansion of supply in the realm of 2.0 mdwt was predicted, to be met by an expansion of demand of 1.5 mbpd. In their more recent report, however, the two Morgan Stanley analysts raised their demand forecast to 1.7 mbpd after this week’s OPEC meeting, noting that at 2.0 mbpd the markets would be balanced and an increase to 2.6 mbpd, as seen last year, would see the market “positively booming.” These numbers do leave room for some notable upside potential in freight rates, which helps explain the 15-20% composite upside potential in the General Maritime, OMI, OSG, and Teekay stocks the analysts cover.
Beyond Supply & Demand: Stronger Asset Values, Hopes for More Dividends
However, it does not appear to be just the numbers that underlie the analysts’ new bullish view. Whereas the earlier analysis focused primarily on the supply-demand balance, the newer one is broader in focus, considering fundamental changes in the tanker companies covered and in the tanker industry. While this sort of qualitative analysis is, to a certain extent, less scientific, it has the advantage that it is less affected by relatively minor differences (i.e. scrapping estimates, oil demand estimates) and so has the potential to be somewhat more consistent in the face of changing forecasts for supply and demand.
In their most recent report, Mr. Slorer and Mr. MacLean note the increased support for net asset values lent by increases in both newbuilding and secondhand prices and by strong balance sheets that are only being further strengthened by record 4Q04 earnings. As cash becomes slightly less dear to companies, they are willing to spend more on investments for the future, pushing up asset prices and even the monetary value of their own companies.
Perhaps more interesting is the temporary positive externality General Maritime seems to have created with the announcement of its new dividend policy. Far from boosting its own stock price at the expense of the other tanker companies, it has actually moved the Morgan Stanley analysts to become more bullish on General Maritime’s competitors, because they expect the change in policy will put pressure on the other U.S.-listed tanker companies to follow suit as the “valuation bifurcation of high yielding stocks” is brought into relief.
General Maritime Announces Dividend Policy, Picks up Premium
General Maritime Announces Dividend Policy, Picks up Premium
In what we can only assume is an effort to drive up the General Maritime share price in advance of Frontline’s potentially hostile take over, General Maritime has adopted a dividend policy. The play here is that dividend yield paying stocks like Knightsbridge and NAT are being valued on a multiple of dividends, which is significantly higher than the tanker companies that pay small dividends (less than 5 percent) or no dividends at all. The chart on page 2 illustrates this phenomenon
GMR Shares a BUY, with Potential to Reach $53, $62…or Even $76
Based on an NAV of $41.83/share, as estimated by Jefferies, General Maritime would be worth over $76 if it was valued the same way as NAT, and even if it was valued like the more modest yield play Knightsbridge, the share price would still go up over $62. Analysts were quick to match General Maritime’s shift in strategy to a shift in target valuation. Even before the dividend policy announcement, Dahlman Rose & Co. analyst Harvey Stober had initiated coverage on General Maritime with a BUY on January 19, noting that: “With cash accumulating quickly, GMR has the wherewithal to institute a significant dividend or major share repurchase program.” Not long after, General Maritime announced just such a plan. Morgan Stanley quickly moved its target P/NAV for GMR up to 150%, upgrading the company to Overweight V with a target share price of $53. The more bullish Jefferies & Company set a target price at $62, close to what GMR would be at VLCCF’s valuation. What we did not see in the reports, however, was a mention of Frontline.
A Future with FRO? Depends on the Price
Peter Georgiopoulos and Jeff Pribor spoke confidently of making accretive acquisitions and growing the company in their conference call, and for the most part questions from listeners revolved around the details of their plans. Only Natasha Boyden of Cantor Fitzgerald ventured to directly ask about the situation with Frontline and whether this action would have an impact. To this there was a pause, followed by a cautious “I don’t know” before the more confident answer that this strategy change was the result of a long study and careful consideration of company strategy. But then just yesterday Bloomberg TV reported that General Maritime would be interested in a merger with Frontline, saying that Peter Georgiopoulos commented that the rival oil tanker operator would have to pay heavily in cash if he wished to purchase the company.
Whether or not this is in the cards, Mr. Georgiopoulos and Mr. Pribor have already succeeded in having their company reevaluated by leading analysts – Magnus Fyhr and Douglas Mavrinac at Jefferies and Mark MacLean and Ole Slorer at Morgan Stanley – and have watched their stock price shoot up an astonishing 9.81% to $44.65 in just one day. Not only that, but the terms of the dividend policy specify the Board of Director’s intent to establish reserves for maintenance and capital expenditures probably equating to around $100 million in 2005. So while they immediately picked up the premium in share price, the company should have a grace period before it actually has to pay out any cash.
In what we can only assume is an effort to drive up the General Maritime share price in advance of Frontline‘s potentially hostile take over, General Maritime has adopted a dividend policy. The play here is that dividend yield paying stocks like Knightsbridge and NAT are being valued on a multiple of dividends, which is significantly higher than the tanker companies that pay small dividends (less than 5 percent) or no dividends at all. The chart on page 2 illustrates this phenomenon
GMR Shares a BUY, with Potential to Reach $53, $62…or Even $76
Based on an NAV of $41.83/share, as estimated by Jefferies, General Maritime would be worth over $76 if it was valued the same way as NAT, and even if it was valued like the more modest yield play Knightsbridge, the share price would still go up over $62. Analysts were quick to match General Maritime’s shift in strategy to a shift in target valuation. Even before the dividend policy announcement, Dahlman Rose & Co. analyst Harvey Stober had initiated coverage on General Maritime with a BUY on January 19, noting that: “With cash accumulating quickly, GMR has the wherewithal to institute a significant dividend or major share repurchase program.” Not long after, General Maritime announced just such a plan. Morgan Stanley quickly moved its target P/NAV for GMR up to 150%, upgrading the company to Overweight V with a target share price of $53. The more bullish Jefferies & Company set a target price at $62, close to what GMR would be at VLCCF’s valuation. What we did not see in the reports, however, was a mention of Frontline.
A Future with FRO? Depends on the Price
Peter Georgiopoulos and Jeff Pribor spoke confidently of making accretive acquisitions and growing the company in their conference call, and for the most part questions from listeners revolved around the details of their plans. Only Natasha Boyden of Cantor Fitzgerald ventured to directly ask about the situation with Frontline and whether this action would have an impact. To this there was a pause, followed by a cautious “I don’t know” before the more confident answer that this strategy change was the result of a long study and careful consideration of company strategy. But then just yesterday Bloomberg TV reported that General Maritime would be interested in a merger with Frontline, saying that Peter Georgiopoulos commented that the rival oil tanker operator would have to pay heavily in cash if he wished to purchase the company.
Whether or not this is in the cards, Mr. Georgiopoulos and Mr. Pribor have already succeeded in having their company reevaluated by leading analysts – Magnus Fyhr and Douglas Mavrinac at Jefferies and Mark MacLean and Ole Slorer at Morgan Stanley – and have watched their stock price shoot up an astonishing 9.81% to $44.65 in just one day. Not only that, but the terms of the dividend policy specify the Board of Director’s intent to establish reserves for maintenance and capital expenditures probably equating to around $100 million in 2005. So while they immediately picked up the premium in share price, the company should have a grace period before it actually has to pay out any cash.
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