yang-mings-massive-loss-prompts-recapitalisation-concerns
http://splash247.com/yang-mings-massive-...-concerns/
(31-03-2017, 09:42 AM)lanoitar Wrote: [ -> ] (31-03-2017, 08:54 AM)gzbkel Wrote: [ -> ]Potential downside if:
- One or more charterers default. Both Yang Ming and TORM are not doing well.
This was a big risk for FSL last year. YM accounts for > 40% of FSL revenue, and has the most leveraged B/S among all carriers. The Taiwanese gov (which has 1/3 stake in YM) has stepped in recently to bail it out, so the default risk has subsided.
TORM doesn't look distressed, and its losses in FY16 were mainly due to non-cash vessel impairment. LTV is at a healthy 58%.
Hi Boon,
As you had previously linked to the "seekingalpha" article, the reported NAV and the current market value can vary to a large extent.
And in my opinion, this is what is happening for FSL's case. The NAV of USD 39 cents per share is optimistic and I think will not be the eventual amount.
We saw this in rickmer's case as well when the reported NAV of Rickmer's fleet was bery high, resulting in a low P/B. However, with each passing year leases were not renewed at its high rate and rickmers had to take impairments whenever these leases were not renewed.
<vested>
Hi Boon,
Thank you for your detailed comments. I sure missed out some things, and I will check out the things you mentioned.
Always a pleasure to learn from lao jiaos like you.
And thanks to CY09 and lanoitar for sharing your valuable views.
I wanted a quick and dirty calculation of the returns should the status quo continue, so my calculation lacks accuracy.
The assumptions are conservative so that I can get the "floor" value.
I am not sure why the manager is not liquidating the trust now. Could it be that they expect market value of the vessels to improve? Or they want to continue to earn the management fees?
Hi gzbkel,
BBCE revenue to FSL = Gross revenue (GR) - vessel operating expenses (VOE), borne by FSL.
Let’s take a closer look at FSL Hamburg:
From page 15 of 4Q2016 results:
“FSL Hamburg generated a net time charter revenue of US$6.5 million in FY 2016 (FY 2015: US$4.6 million). After deducting vessel operating expenses, the vessel generated BBCE revenue of US$3.6 million in FY 2016 (FY 2015: US$1.5 million).
”
Old charter rate = USD 18,000/day,
Old GR = USD 6.57 m per annum
Old BBCE revenue = USD 3.6 m per year
Implied vessel operating expenses (VOE) = 6.5 – 3.6 = USD 2.9 m per year.
Assumed VOE remains the same
New charter rate = USD 13,000/day,
New GR = USD 4.7m per year
New BBCE revenue = 4.7 – 2.9 = USD 1.8 m per year
Reduction in charter rate = 18,000 – 13,000 = USD 5,000 / day (-28%)
Reduction in gross revenue = 6.5 – 4.7 = USD 1.8 m per year ( - 28%)
Reduction in BBCE revenue = 3.6 – 1.8 = USD 1.8 m ( - 50%)
In another words,
Reduction in GR = reduction in BBCE revenue = USD 1.8 m, if VOE remains unchanged.
Percentage (%) reduction in daily charter rate = Percentage (%) reduction in yearly GR = - 28%
GR is reduced by - 28%, but BBCE revenue is reduced by - 50% , NOT – 28%
Applying the same exercise, one should gets a BBCE revenue reduction of – 50%, - 48%, and -53% for FSL Singapore, FSL Hong Kong and FSL Shanghai respectively.
For these 4 vessels, your assumption of 40% reduction in BBCE revenue do NOT look conservative at all.
(to be continued)
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Hey Boon, thanks a lot for digging out the information about the vessel operating expenses!
Looks like I need to re-estimate with a greater MOS... haha
(05-04-2017, 12:42 AM)Boon Wrote: [ -> ]Hi gzbkel,
BBCE revenue to FSL = Gross revenue (GR) - vessel operating expenses (VOE), borne by FSL.
Let’s take a closer look at FSL Hamburg:
From page 15 of 4Q2016 results:
“FSL Hamburg generated a net time charter revenue of US$6.5 million in FY 2016 (FY 2015: US$4.6 million). After deducting vessel operating expenses, the vessel generated BBCE revenue of US$3.6 million in FY 2016 (FY 2015: US$1.5 million).
”
Old charter rate = USD 18,000/day,
Old GR = USD 6.57 m per annum
Old BBCE revenue = USD 3.6 m per year
Implied vessel operating expenses (VOE) = 6.5 – 3.6 = USD 2.9 m per year.
Assumed VOE remains the same
New charter rate = USD 13,000/day,
New GR = USD 4.7m per year
New BBCE revenue = 4.7 – 2.9 = USD 1.8 m per year
Reduction in charter rate = 18,000 – 13,000 = USD 5,000 / day (-28%)
Reduction in gross revenue = 6.5 – 4.7 = USD 1.8 m per year ( - 28%)
Reduction in BBCE revenue = 3.6 – 1.8 = USD 1.8 m ( - 50%)
In another words,
Reduction in GR = reduction in BBCE revenue = USD 1.8 m, if VOE remains unchanged.
Percentage (%) reduction in daily charter rate = Percentage (%) reduction in yearly GR = - 28%
GR is reduced by - 28%, but BBCE revenue is reduced by - 50% , NOT – 28%
Applying the same exercise, one should gets a BBCE revenue reduction of – 50%, - 48%, and -53% for FSL Singapore, FSL Hong Kong and FSL Shanghai respectively.
For these 4 vessels, your assumption of 40% reduction in BBCE revenue do NOT look conservative at all.
(to be continued)
_________________________________________________________________________________________
(06-04-2017, 07:50 AM)gzbkel Wrote: [ -> ]Hey Boon, thanks a lot for digging out the information about the vessel operating expenses!
Looks like I need to re-estimate with a greater MOS... haha
(05-04-2017, 12:42 AM)Boon Wrote: [ -> ]Hi gzbkel,
BBCE revenue to FSL = Gross revenue (GR) - vessel operating expenses (VOE), borne by FSL.
Let’s take a closer look at FSL Hamburg:
From page 15 of 4Q2016 results:
“FSL Hamburg generated a net time charter revenue of US$6.5 million in FY 2016 (FY 2015: US$4.6 million). After deducting vessel operating expenses, the vessel generated BBCE revenue of US$3.6 million in FY 2016 (FY 2015: US$1.5 million).
”
Old charter rate = USD 18,000/day,
Old GR = USD 6.57 m per annum
Old BBCE revenue = USD 3.6 m per year
Implied vessel operating expenses (VOE) = 6.5 – 3.6 = USD 2.9 m per year.
Assumed VOE remains the same
New charter rate = USD 13,000/day,
New GR = USD 4.7m per year
New BBCE revenue = 4.7 – 2.9 = USD 1.8 m per year
Reduction in charter rate = 18,000 – 13,000 = USD 5,000 / day (-28%)
Reduction in gross revenue = 6.5 – 4.7 = USD 1.8 m per year ( - 28%)
Reduction in BBCE revenue = 3.6 – 1.8 = USD 1.8 m ( - 50%)
In another words,
Reduction in GR = reduction in BBCE revenue = USD 1.8 m, if VOE remains unchanged.
Percentage (%) reduction in daily charter rate = Percentage (%) reduction in yearly GR = - 28%
GR is reduced by - 28%, but BBCE revenue is reduced by - 50% , NOT – 28%
Applying the same exercise, one should gets a BBCE revenue reduction of – 50%, - 48%, and -53% for FSL Singapore, FSL Hong Kong and FSL Shanghai respectively.
For these 4 vessels, your assumption of 40% reduction in BBCE revenue do NOT look conservative at all.
(to be continued)
_________________________________________________________________________________________
Hi gzbkel,
There are 11 vessels we are talking about with leases expiring and/or due for renewal in 2017/2018.
The affected BBCE revenue for 11 vessels = USD 36 m
The affected BBCE revenue for the 4 vessels ~ USD 18 m
The affected BBCE revenue for the other 7 vessels ~ USD 18 m
A uniform 50% cut to 4 vessels + a uniform 30% cut to 7 vessels is still equivalent to a uniform 40% cut across the 11 vessels.
If the uniform 30% cut to the 7 vessels could be proven to be a valid conservative assumption, then overall, the uniform 40% cut across 11 vessels is still on the conservative side.
Otherwise, to err consistently on the conservative side, one would have to apply a uniform 50% (or even 60%) cut to the 11 vessels
40% cut => USD 14.5 m reduction in BBCE revenue
A further 10% uniform cut implies a further reduction in BBCE revenue of 0.1 * 36 = USD 3.6 m per year. ( = USD 36 m over 10 years ; USD 5.6 cents per share).
We are not aiming to be precisely right but trying to be roughly right in our estimation.
Without further detail analysis, a 40% ~50% uniform cut looks roughly to be the best estimate, IMO.
A 60% uniform cut looks to be an overkill.............
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