28-12-2010, 10:17 PM
Hi Nextwave,
I don't quite understand what you are driving at.
No one is disputing that the vessel industry are commodity-like in nature since ship-builders can easily create vessels of any specifications within 2-3 years. But I don't understand how does this translate to vessels having 0 value ? At the moment, we are in a midst of a shipping recession and many well-run shipping liners did report a profit so if the value of their ships are zero, wouldn't their ROE be infinity ? As for shopping malls and residential properties, a property crash will wipe them out too as we can see in USA, Japan and recently in Europe. Half-completed buildings and townships due to poor capital management.
What does this mean ? It is not the type of asset that determines the Trust fate - it is the Trust's capital structure. I would consider PST assets to be crap compared to Saizen REIT 'defensive' residential properties but one managed to grow its NAV while another is under-going fire-sale.
So the cash received by the Trust is false ? So the vessels owned has zero value ? So bankers are lending paper money at 80% LTV to Trust this year ? So the growth in NAV is purely fictional ? And a ghost ship transports our goods and raw materials across the high seas ?
Unless I am mistaken, the greater fool theory only holds for asset class which cannot generate any cash-flow on its own ie gold.
I just glanced through Comfort Delgro taxi rental business which has operations in Singapore, Vietnam, Australia and the UK.
Taxi Assets: $1.214 billion
Taxi Revenue: $0.927 billion
Taxi Operating Profits: $102.1 million
Operating Profit to Asset Yield: 8.4%
Assuming Comfort charges 3% of the taxi revenue as part of its Management fees, this will cost $27.1 million. This value is a mere 2.9% of its real staff cost of the entire Comfort Group ($960 million) even though taxi revenue accounts for 39.7% of the Group's revenue. In other words, it is extremely likely, Comfort staff cost (or Management fees) exceed the 3% mark by a huge margin.
So by your logic, Comfort Delgro Management is even worst than the shipping trust Manager since its 'management fees' percentages are many times larger. And taxis are easily manufactured so again, it has zero value especially when oil prices soars. And lastly, their dividends are a mere illusion since we cannot determine its value with any certainty ? And the growth in book value is fictitious ? And so investing in Comfort is 'greater fool theory' ?
I apologize for poking fun but unless you clarify your stance on 'zero value creation' in all leasing businesses (but strangely not on leasehold assets), I think I am misinterpreting your points.
Hi Blackjack,
The shipping trust industry in Singapore is pathetic. A quick glance in the US listed shipping trust and you can see the huge disparity in quality and size. For this reason, I think it is more prudent to wait for this sector grow and attract better players before diving straight in (unless you can stomach the risk). This applies to all of the business trust here including property development and utilities. The local REIT sector is more developed and matured and hence carries a lower risk profile.
Cheers to all
I don't quite understand what you are driving at.
(28-12-2010, 08:59 PM)nextwave Wrote: [ -> ]the trust manager is getting a free ride through
using shareholder money to buy a notoriously volatile asset like ships, value of which is known to no one, if demand is high one can techinically create as many ships as possible unlike creating as many orchard road or 5th avenue condos or shopping malls, thus fundamental value of a ship= cyclically adjusted price of steel+ other raw materials + labor, in bad times, value of ship= ZERO, study shipping cylces over a hundred years and you will know what i mean, the best of shipping titans have been unable to time the markets
No one is disputing that the vessel industry are commodity-like in nature since ship-builders can easily create vessels of any specifications within 2-3 years. But I don't understand how does this translate to vessels having 0 value ? At the moment, we are in a midst of a shipping recession and many well-run shipping liners did report a profit so if the value of their ships are zero, wouldn't their ROE be infinity ? As for shopping malls and residential properties, a property crash will wipe them out too as we can see in USA, Japan and recently in Europe. Half-completed buildings and townships due to poor capital management.
What does this mean ? It is not the type of asset that determines the Trust fate - it is the Trust's capital structure. I would consider PST assets to be crap compared to Saizen REIT 'defensive' residential properties but one managed to grow its NAV while another is under-going fire-sale.
(28-12-2010, 08:59 PM)nextwave Wrote: [ -> ]the conversation ends right here as "dividends" are mainly an illusion that is paid through the book value of ships as long as a greater fool values the ships at that price- THERE IS ZERO VALUE CREATION
So the cash received by the Trust is false ? So the vessels owned has zero value ? So bankers are lending paper money at 80% LTV to Trust this year ? So the growth in NAV is purely fictional ? And a ghost ship transports our goods and raw materials across the high seas ?
Unless I am mistaken, the greater fool theory only holds for asset class which cannot generate any cash-flow on its own ie gold.
(28-12-2010, 08:59 PM)nextwave Wrote: [ -> ]for those that that still like this business model, i have a proposition for you- me and my business partner are looking for 5m$ to buy a fleet of taxis in India to be run professionally, we will pay you part of the taxi rentals as dividends (yield 7%+) and charge you just 3% of total assets as mgmt fees....
I just glanced through Comfort Delgro taxi rental business which has operations in Singapore, Vietnam, Australia and the UK.
Taxi Assets: $1.214 billion
Taxi Revenue: $0.927 billion
Taxi Operating Profits: $102.1 million
Operating Profit to Asset Yield: 8.4%
Assuming Comfort charges 3% of the taxi revenue as part of its Management fees, this will cost $27.1 million. This value is a mere 2.9% of its real staff cost of the entire Comfort Group ($960 million) even though taxi revenue accounts for 39.7% of the Group's revenue. In other words, it is extremely likely, Comfort staff cost (or Management fees) exceed the 3% mark by a huge margin.
So by your logic, Comfort Delgro Management is even worst than the shipping trust Manager since its 'management fees' percentages are many times larger. And taxis are easily manufactured so again, it has zero value especially when oil prices soars. And lastly, their dividends are a mere illusion since we cannot determine its value with any certainty ? And the growth in book value is fictitious ? And so investing in Comfort is 'greater fool theory' ?
I apologize for poking fun but unless you clarify your stance on 'zero value creation' in all leasing businesses (but strangely not on leasehold assets), I think I am misinterpreting your points.

Hi Blackjack,
The shipping trust industry in Singapore is pathetic. A quick glance in the US listed shipping trust and you can see the huge disparity in quality and size. For this reason, I think it is more prudent to wait for this sector grow and attract better players before diving straight in (unless you can stomach the risk). This applies to all of the business trust here including property development and utilities. The local REIT sector is more developed and matured and hence carries a lower risk profile.
Cheers to all
