Not to worry - I am here for the debate and discussion, and to learn more about value investing myself!
On shipping, let me play our some scenarios for you as to why I think it is dangerous, in addition to the comments I left on the shipping board and my earlier elaborations:
- Drybulk fleet is c.450m DWT, with an additional c.250mDWT on order, c.100mDWT of which is due for delivery this year and the remainder before 2014.
- Pre-2008, 25mDWT was the most deliveries in any one year
- 2009 resulted in c.50mDWT of deliveries
- Excepting a spike in 2004 as China enters the fray, max growth in ton mile demand was c.7% p.a.: vessel deliveries far exceed this growth, and scrapping of old vessels would have to far exceed all historical precedents to re-align supply and demand
- Oh, and the largest fleets are the youngest as well, which is not going to be conducive to pushing owners to scrap those nice young vessels
So, even with strong growth and halving of deliveries as compared to orders, the fleet supply and demand is heading towards being well out-of-kilter by year-end and into 2011-12 as well.
- Vessel values today remain above historical long-run averages, including inflation. Most public companies have yet to write-down fleets if they are still earning on long-term charters or at least covering operating and finance expenses.
I would not even look at price-to-book, historical dividend records or past earnings record in this industry, as they don't provide any margin of safety or guide to future.
That is before any thought of refinancing, covering balloon debt payments, covering newbuilding finance commitments (if any), two-pocket situations, dilution etc.
I don't buy the China arguments for taking all this new demand - the ports don't exist, and the internal demand doesn't exist that can permit demand growth of 20%pa to absorb this new capacity.
What do you think of my reasoning?
Best regards,
Alex |
