Project work ipe d'amico

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L’obiettivo di questo lavoro è stato la creazione di uno strumento per la valutazione del segmento dry cargo mediante il quale derivare il posizionamento delle società in esso operanti. A tal fine, sono state individuate le seguenti macroaree di analisi: struttura della flotta, parametri economico/patrimoniali e drivers operativi. Successivamente è stata redatta una ranking list che valutasse in maniera integrata i differenti key drivers.
Lo studio ha evidenziato un forte legame tra l’età media della flotta e le performance delle società, ma anche una non diretta correlazione tra queste ultime e le strategie di ownership. La redditività marginale, poi, sembra essere legata alla concentrazione su non più di due segmenti di navi, dei quali almeno uno di tonnellaggio elevato. Inoltre, il ritorno sul capitale proprio fluttua attorno al valore medio pari a circa il 10%; ciò a dimostrazione del fatto che il segmento dry bulk ha fronteggiato in maniera soddisfacente la crisi nel 2010.
Interessanti correlazioni si sono poi evidenziate tra struttura della flotta e parametri operativi. In particolare, la copertura sul time charter appare proporzionale al tonnellaggio delle navi. In aggiunta, le società con le flotte più vecchie riportano minori valori di mercato rispetto a quelli iscritti in bilancio; ciò in accordo con la situazione attuale di oversupply che premia le navi più giovani.
In sintesi, tale studio si propone di formalizzare e porre in termini quantitativi valutazioni che gli armatori affidano abitualmente alla loro esperienza.


The aim of this project is to implement a competitors valuation tool for dry
cargo segment. Accordingly, three analysis fields have been identified,
namely: fleet structure, key financials and efficiency and effectiveness.
Thereafter, a ranking list has been produced in order to suitably compare
different key drivers.
The study showed clear correlation between fleet average age and
company performance. In addition, different ownership strategies resulted
equally successful.
As for percentage profitability, this seemed to be correlated with the
concentration on no more than two segments (of which at least one of bigger
vessels). Similarly, leverage level appeared to affect company performance.
Return on equity fluctuating near the average figure of about 10% revealed
that dry cargo shipping business well faced the crisis into 2010.
As far as correlation between fleet structure and efficiency and
effectiveness is concerned, time charter coverage is related to vessel size.
Moreover, companies with oldest fleet suffered from lower market value
compared with book value according to current oversupply momentum
Overall, the analysis carried out has the purpose to quantify market
valuations which are usually based on shipowners experience and instinct.

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Project work ipe d'amico

  1. 1. Competitors valuation tool Dry Cargo Sector<br />Componenti del PW:<br />Carlo Maria Forte<br />Gerardo Daniele Miscuzzi<br />Giorgia Riccardi<br />Tutor: <br />Giovanni Capello<br />Group Planning & Control Manager<br />Master in Shipping<br />Napoli, 1° Aprile 2011<br />
  2. 2. Methodology<br />Valuation Tool (VT)<br />“Best in class”<br />Different strategies<br />Growth Path<br />Effectiveness<br />…<br /><ul><li>Fleet Structure (FS):
  3. 3. Size
  4. 4. Ownership
  5. 5. Average Age
  6. 6.
  7. 7. Key Financials (KF):
  8. 8. Margins / Growth
  9. 9. Assets / Net Debt
  10. 10. Returns indicators
  11. 11.
  12. 12. Efficiency & Effectiveness (EE):
  13. 13. Daily TCE
  14. 14. Cost structure
  15. 15. Coverage
  16. 16. …</li></ul>Master in Shipping<br />
  17. 17. Selected Companies Overview<br />Master in Shipping<br />
  18. 18. Fleet StructureSegment breakdown (%) <br /><ul><li>Pacific Basin controls the largest fleet (in addition ~ 30 short term charter-in)
  19. 19. Including short term charter-in D/S Norden current fleet consists of ~ 150 vessels
  20. 20. Pacific Basin and D/S Norden have the lowest ownership percentage
  21. 21. Globus has the smallest fleet (only 5 vessels)
  22. 22. Only D/S Norden, Genco and Seanergy operate in all four segments
  23. 23. Eagle Bulk is focused on Handymax segment (all sisterships)
  24. 24. In terms of higher number of vessels per segment: HandysizePacific Basin, Handymax Eagle Bulk, Panamax Excel Mtm. and CapesizeNavios
  25. 25. 70% of analyzed companies completely owns their active fleet
  26. 26. Common fleet size is between 35 and 50 vessels (outliers Pacific Basin and Globus Maritime) mainly Handymax and Panamax</li></ul>Master in Shipping<br />Source: SEC filings/ Company Report (31/12/10) – <br />RS Platou (October 2010)<br />
  27. 27. Fleet StructureAverage age (years)<br /><ul><li>D/S Norden, Globus Mtm. and Safe Bulkers have the youngest fleet
  28. 28. TBS Int. controls the oldest fleet (the average age is partially reduced by young Handysize multipurpose tweendeckers)
  29. 29. The average segment age of Excel Mtm. fleet is not homogeneous; the company states its intention to reduce it
  30. 30. The strategy of almost all the competitors has been focused on young fleet
  31. 31. 38% of the companies manages a fleet older than the average (7.4)
  32. 32. Small segments contain older vessels: Capesize, Panamax, Handymax and Handysize average age is respectively: 5.9, 7.2, 8.2 and 9.0. Pacific Basin and Seanergy reflected a countertrend </li></ul>Master in Shipping<br />Source: SEC filings/ Company Report (31/12/10) – <br />RS Platou (October 2010)<br />
  33. 33. Fleet StructureDWT growth (MM)<br /><ul><li>Navios shows the highest absolute increase of its fleet; the growth is composed mainly by Capesize and Panamax
  34. 34. The increase in D/S Nordenfleetismainlyfocused on Handysize and Handymax
  35. 35. SafeBulkersremainsfocused on Panamax
  36. 36. Excel Mtm., Globus Mtm., and Seanergy do not have newbuildings at all
  37. 37. Genco fleet grew from 34 to 49 vessels (12 Handymax)
  38. 38. D/S Norden fleet grew from 2009 by 54% and is still expanding with 30 newbuildings. Opposite growth trend for Dry Ships (decreasing trend)
  39. 39. More than 50% of companies will have a global presence ranging between 3 and 4 DWT/million
  40. 40. Overall, newbuildings are 102: 36 Handysize, 25 Handymax, 24 Panamax and 17 Capesize, for about 7.6 DWT/MM (24% of relative existing fleet)</li></ul>Master in Shipping<br />Source: SEC filings/ Company Report (31/12/10) – <br />RS Platou (October 2010)<br />
  41. 41. Key FinancialsAbsolute profitability (MM$)<br /><ul><li>The volume effect of short term charter-in is reflected in higher TCE revenues forD/S Norden and Pacific Basin
  42. 42. Excel Maritime and TBS have the highest incidence of depreciation and impairment (due to old fleet)
  43. 43. Low value of TCE/Revenues for D/S Norden, Pacific Basin and TBS suggests an high incidence of voyage charter (mainly as an employment strategy on short term activity)
  44. 44. The smallest segments (with exception of Seanergy) seem to have the highest incidence of voyage charter
  45. 45. For Navios and Paragon total revenues come from TC hire
  46. 46. Most profitable competitors are: D/S Norden, Genco, Dryships and Diana
  47. 47. Norden and Dryships exchange their position from EBIT to Net Income due to a completely different financial structure</li></ul>Master in Shipping<br />Source: SEC filings/ Company Reportsasof 31/12/10 – <br />RS Platou (February 2011)<br />
  48. 48. Key FinancialsEBITDA/EBIT margin (%)<br /><ul><li>EBITDA margin = EBIT margin for D/S Norden and Pacific Basin because of low ownership percentage
  49. 49. Safe Bulkers shows the highest EBITDA/EBIT margin combination with a significant volume
  50. 50. TBS Int. has a negative EBIT margin due to large impairment (200 MM)</li></ul>Ownership %<br /><ul><li>Due to different ownership strategy the margin comparison should be focused both on EBITDA and EBIT</li></ul>Master in Shipping<br />Source: SEC filings/ Company Reportsasof 31/12/10 – <br />RS Platou (February 2011)<br />
  51. 51. Key FinancialsProfitability indices (%)<br /><ul><li>Safe Bulkers (that is highly geared) experienced a positive leverage effect
  52. 52. Debt and loss due to financial instruments have a negative incidence on DryShips ROE
  53. 53. TBS shows negative figures of ROE and ROCE and a downward ROE trend
  54. 54. Safe Bulkers ROE plummeted due to massive capitalization
  55. 55. Globus experienced the most significant growth in ROE
  56. 56. DS Norden is not leveraged
  57. 57. Average ROE (not considering TBS) is 10.2%, and average ROCE is 6.8%
  58. 58. 46% of companies shows a leverage (ratio between long term debt and equity) above the average (1.07) </li></ul>Master in Shipping<br />Source: SEC filings/ Company Reportsasof 31/12/10 – <br />RS Platou (February 2011)<br />
  59. 59. Key FinancialsCash flow (MM$)<br /><ul><li>Diana, DryShips, Eagle Bulk, Genco and Safe Bulkers support their investments with financing strategy
  60. 60. D/S Norden, Excel Mtm. and Pacific Basin invested over the period using their own cash (equity instead of debt)
  61. 61. Seanergy investing cash flow is affected by the acquisition of other business (with positive cash position) by using a share issuance
  62. 62. Investments level still high in 2010 (lowest net investments around $70 mln) with a different finincing strategy (in some cases affected by existing debt repayment impact) </li></ul>Master in Shipping<br />Source: SEC filings/ Company Reportsasof 31/12/10 – <br />RS Platou (February 2011)<br />
  63. 63. Key FinancialsFixed assets & debt (MM$)<br /><ul><li>DryShips has the biggest figure for fixed asset, debt and fixed assets – net debt
  64. 64. Navios has the lowest ratio fleet/fixed assets
  65. 65. Eagle Bulk and Safe Bulkers show the worst ratio net debt/ fixed assets with a stretched fleet
  66. 66. Considering the trend of fixed assets and gross debt volume, Excel Mtm isanexception due to a consolidated debt structure on old vessels
  67. 67. The average figure for net debt/fixed assets is 39% (excluding TBS Int.)
  68. 68. D/S Norden has a liquid structure (no outstanding debt and consequently a positive net indebness) meaning a strongly different strategy compared with other Companies</li></ul>Master in Shipping<br />Source: SEC filings/ Company Reportsasof 31/12/10 – <br />RS Platou (February 2011)<br />
  69. 69. Efficiency & EffectivenessDaily TCE ($)<br /><ul><li>Daily TCE for Panamax vessels are quite steady for the three companies examined
  70. 70. In the Handymax segment Genco experienced higher TCE rates than Eagle Bulk with a lower TC coverage
  71. 71. The same consideration done for Handymax concerns Panamax with reference to Genco and Safe Bulkers</li></ul>Avg 23.189 $/day<br />BSI avg 26,435 $/day<br />Avg 17.116 $/day<br />BHSI avg 18.830 $/day<br />Avg 48.359 $/day<br />BCI avg 36,160 $/day<br />Avg 29.140 $/day<br />BPI avg 30,155 $/Day<br /><ul><li>Highest spread betweeen Companies and Market index on Capesize segment meaning an higher coverage at higher levels
  72. 72. During the first half 2010 Genco achieved the higher daily TCE in all segments (near to indexes) with the exception of Capesize</li></ul>Master in Shipping<br />Source: SEC filings/ Company Reports (H1 2010)<br />
  73. 73. Efficiency & EffectivenessTC Coverage (%)<br /><ul><li>Genco shows lack of coverage especially in 2012 and 2013 (it’s the only one with coverage indication for Handysize segment: 28% in 2011, 31% in 2012 and 19% in 2013)
  74. 74. Excel Mtm. has a complete exposure in Handymax segment for the next three years and in Panamax segment for 2012 and 2013
  75. 75. Safe Bulkers is generally the most covered company for the next three years
  76. 76. DryShips shows the best coverage average percentage in 2011 but is significantly exposed in the next years
  77. 77. The coverage seems to be proportional to segment (the bigger the vessel the higher the coverage)
  78. 78. By 2013 there will be a substantial decrease in coverage, except for Capesize vessels</li></ul>Master in Shipping<br />Source: JeffriesresearchasofDecember 2010<br />
  79. 79. Efficiency & EffectivenessCoststructure (%)<br /><ul><li>D/S Norden and Pacific Basin show high incidence of Opex and the lowest level of daily G&A as a result of their strategies (large fleet, low ownership percentage and high short term charter-in)
  80. 80. Balanced cost structure, high volumes of TCE revenues and similar fleets for Dry Ships and Navios. In addition these companies have the same (and highest) level of daily G&A
  81. 81. Excel Mtm., Safe Bulkers and Seanergy reveal a good cost structure with an average of 60% opex, 20 % G&A and 20% financing costs
  82. 82. D/S Norden, Genco, Seanergy, Safe Bulkers and Pacific Basin daily G&A’s under the average</li></ul>Master in Shipping<br />Source: SEC filings/ Company Reports (Q3 2010)<br />
  83. 83. Efficiency & EffectivenessAverage vessel book value vs market value (MM$)<br /><ul><li>Safe Bulkers fleet has market value higher than book value
  84. 84. Excel Mtm. shows the greatest fleet value spread with market value significantly lower than book value
  85. 85. Companies with oldest fleet suffered from lower market values compared with book value
  86. 86. Overall, the average vessel market value is lower than book value with the exception of Safe Bulkers</li></ul>Master in Shipping<br />Source: Morgan Stanley researchasof 17/01/11 - SEC filings/ Company Reportsasof 31/12/10<br />
  87. 87. Overall ResultsKPI Radar Monitorning<br />Valuation drivers:<br /><ul><li>Fleet on water: (FS) (company fleet/ global fleet per segment)
  88. 88. Average age (FS)
  89. 89. EBIT margin (KF)
  90. 90. ROE (KF)
  91. 91. Leverage (KF)
  92. 92. Interest incidence: (KF) (EBIT-net income)/|EBIT|
  93. 93. Net debt (KF)
  94. 94. Daily Interests (EE)
  95. 95. Daily G&A (EE)</li></ul>2nd<br />1st<br />4th<br />3rd<br />Master in Shipping<br />
  96. 96. Master in Shipping<br />Conclusion<br /><ul><li>Correlation between fleet average age and company performance
  97. 97. Different ownership strategy can be equally successful
  98. 98. Percentage profitability (EBIT margin) seems to be correlated with the concentration on no more than 2 segments (of which at least one of bigger vessels - Capesize/Panamax, except for Eagle Bulk)
  99. 99. Leverage level in general affected company performance
  100. 100. ROE fluctuating near the average figure (about 10%) meaning that dry cargo shipping business well faced the crisis into 2010
  101. 101. In 2010 we registered two main cluster of investing policy: investments matched with debt (lower ranking position) and investments supported by equity (higher ranking position)
  102. 102. The bigger the vessel the higher the coverage
  103. 103. Balanced cost structure: ~60% opex, ~20% G&A, ~20% financing cost
  104. 104. Companies with oldest fleet suffered from lower market values compared with book value according to current oversupply momentum</li></li></ul><li>Thank you for your attention!<br />

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