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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (19843)	10/12/2004 9:02:52 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78714

SFL: No, did not consider the profit sharing aspect when I purchased. I added because of the dividend and because I've been in FRO a few years and I'm somewhat comfortable with the management. I figured there might be a play with SFL as an undervalued situation if perhaps many FRO holders might sell the few SFL shares they received as a spin-off from FRO. I see FRO and SFL as linked - that might be quite wrong - and I wanted to increase my exposure to tankers. I chose to add to SFL. (FRO seems to me to have performed better though - until today that is, when both were hammered.) I see no reason to sell either stock - certainly not because of a Smith Barney call. At this point I'm considering adding a bit to SFL again and may do it yet. ------ Thanks for your analysis of the situation. Very helpful. Much more reasoned than what I can provide.

To: E_K_S who wrote (19843)	10/12/2004 10:53:30 PM
From: Stewart Whitman	Respond to of 78714

If I recall correctly, the profit sharing part of SFL is that, above a certain base rate, SFL gets 20% of the rate and FRO gets the rest. The base rate, that goes to SFL (less some expenses), is actually quite high - around average day rates for prior periods. The publicly reported info on the SB analysis indicated that part of the downgrade of SFL was because it was trading up some percentage (e.g. 50% since June, 30% in the last month). This was based on the initial trading price of SFL post-spin-off. But, it's pretty clear that SFL shouldn't have been trading around $12 - that's a ridiculously high dividend (about 12%). I think that's higher than the bank rates they pay on their debt. Another thing, if, as you mentioned, the SB analyst really expected that SFL would get $600 million in profit sharing, that's about $8 per SFL share. If he really thought that, I wonder what his valuation of SFL would be! That's their mistake - I don't think anyone expected that. I think that people have failed (or perhaps will fail) to correctly value FRO. It doesn't matter too much now, as SFL is still mostly consolidated as part of FRO and day rates are very high. But if FRO spun of all of SFL (which I doubt will happen) and day rates drop significantly, FRO probably would make very little money - less that in previous down cycles. I.e., during a down cycle, separately, FRO might even be valued for less than SFL. Also, if you believe FRO & SFL reflect day rates, and that day rates have peaked and are going lower, then today's stock pricing action for SFL (-9.2%) and FRO (-7.3%) is pretty irrational. After all, proportionally, FRO benefits more than SFL from higher rates, so it should drop more than SFL. Personally, I was happy buying SFL in the low teens. I'd be happy selling in the mid to high twenties. I'd feel better about SFL if SFL had a business plan that was more independant of FRO. Regards, Stew

To: E_K_S who wrote (19843)	11/24/2004 1:45:20 PM
From: E_K_S	Respond to of 78714

SFL stock is trading at a new high after the release of their earnings, increase in their dividend by 25% and their announcement of a 2 million share buy back program. Ship Finance International Limited - Mandatory notification of trade (Tuesday November 23, 5:38 am ET) (http://biz.yahoo.com/prnews/041123/lntu001_1.html) It appears that they are only 1/3 done from their approved share buy back program of 2 million shares. They tend to buy at most 75K shares a day so as not to impact the stock price too much. SFL receives 20% profit sharing from their parent FRO. I imagine some of the profit-sharing funds are being used for their share buy back program' since the financing agreements (by my recollection) prohibit a special dividend. This is a great way to add shareholder value. EKS