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Singapore Shipping Corp
07-11-2016, 09:40 AM,
Post: #331
RE: Singapore Shipping Corp
From Bloomberg:

Japan’s three biggest shippers agreed to combine their container operations to create the world’s sixth-largest box carrier, as the industry steps up consolidation this year amid a global turmoil in the sea-cargo business.
Nippon Yusen KK, Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd., which are predicting operating losses this year, will create a company that will control 7 percent of the world container-shipping trade, according to a joint statement in Tokyo Monday. The combination will need to be approved by regulators in the European Union, U.S., China and Japan among others.

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23-07-2017, 07:41 PM,
Post: #332
Singapore Shipping Corp
Based on 2016 results, SSC has a price to free cash flow ratio of about 4.5. It seems Mr. Market is undervaluing this counter. Or is this a value trap? Food for thought.


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23-07-2017, 08:49 PM, (This post was last modified: 23-07-2017, 08:57 PM by CY09. Edit Reason: edits )
Post: #333
RE: Singapore Shipping Corp
Shipping counters tend to have a high free cash flow generation ability. This is because: 1) the economic useful life of ships (about 20 years); and the financing of these ships (more than 50% of the ship's value tend to be financed by debts). In addition, under cash flow accounting, the payment of loan principal and its interest tend to fall in the "cash flow under financing activity", this results in free cash flow (Operating - investing) to look disproportionately high. Ships tend to be only worth their scrap value at the end of their useful life

Using an example to explain: A coy buys a ship for 140 mil which has a cash flow (opex) generation of 10 mil for its 20 years with annual maintenance of 500k. It uses 100 mil of 20 year debt and 40mil equity to finance it.

Operating cash flow: 10 Mil.
Minus Maintenance Capex: 500k
Free cash flow: 9.5mil
free cash flow to equity: 23.75%

However if we are to include the annual debt repayment of 5 mil,
the revised free cash flow is 4.5mil, with a free cash flow to equity of only 11.25%

Therefore to get a more robust valuation for shipping related stocks, a better way is to further minus off the interest and annual loan repayment of principal

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24-07-2017, 04:12 PM,
Post: #334
RE: Singapore Shipping Corp
Thanks for the detailed explanation. So FCF will appear high as long as the company does not buy new ships.

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12-08-2017, 06:48 PM,
Post: #335
Ro Ro ship
Discovering Ro Ro Ship - published yesterday 11 Aug 2017


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