Vessel Valuations: Caveat Emptor

Until issuers prove to the market that they should be valued on cash flows, the publicly traded debt and equity of shipowning companies will be judged, at best, on their break up price-asset values. While fresh newcomers, salty veterans (and perhaps anyone who has worked in the airline industry) may believe that determining vessel valuations is as simple as phoning-up a few brokers in London, New York and Piraeus, the truth is, unlike aircraft, very few ships are identical. Those financial modeling-junkies who believe that the difference in value can be accounted for by building in a margin of error would be interested to learn that sisterships that have had different levels of maintenance or have been trading different cargoes can have values which vary by as much as 40%; certainly more than enough to foul a model and scuttle a potential acquisition. Peter Cooney of Acomarit recently told us that he had seen a ship that had been treated so poorly that it had to be scrapped before its 10th birthday.

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