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Strategies & Market Trends : Value Investing
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From: anializer4/10/2010 7:59:56 AM
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Unfortunately you can't compare the 2 fleets. GNK only has 8 handysize which represent 232 tons while FREE's entire fleet is Handysize at 270 tons. The condition of the ships, age, routes, size, all play a part in the valuations and net asset valuation done on a balance sheet basis is different from valuing just the ships. 144 mil of stockholders equity for FREE vs. 928 million net asset valuation on two completely different animals makes your analysis a tuff chore.

If you look at sales of recent handymax and handysize vessels like those of Globus Maritime or Excel, or even GE shipping, you will find a large variance in booked losses and booked gains on the sales after consideration of depreciation in 2009. Recent sales by Globus averaged about 15 - 20% losses booked on sales. Excel on the other hand has booked gains on sales of older handymax vessels amounting to 60% gains in 2007.

Just no easy way to evaluate comparatively. OSG for example is a completely different animal with dry and liquid bulk and a varied fleet and if you look at total DW tons they are valued at $269 a ton. But just how much of the total net asset amount is buildings and other financial assets.

One just has to make some assumptions when valuing a fleet. I wish I had a better answer for you. But a stab is all we can take. Lets assume a large margin of safety based on realized 2009 booked losses by Globus Maritime in 2009. Lets say they booked 20% losses on sales of similar carriers. Lets assume FREE will lose 50% on sales. It's still cheap when looking at equity per share since the undervaluation to stated book is still a discount. Considering that they depreciate the ship value each year, does a 50% loss sound reasonable at final booking of the sale?
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