Martin Lee @ Sg
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Shipping Stocks Battered

The share prices of companies in the shipping sector had been battered in the past few months amidst uncertainty in the global economy and trade.

And analysts are not positive on the outlook of the shipping sector either.

Both NOL and Cosco trade at around $1, with their prices falling more than 50% since the start of the year.

Hutchison Port Holdings Trust, which listed only in March this year, has lost about 40 per cent in stock price since it listed at an offer price of US$1.01. This is a brutal loss for IPO investors in just a short period of time. With a projected DPU of 5.9 cents, the current trading price implies a yield of almost 10%.

Shipping Trusts have not been spared. Rickmers, First Ship Lease (FSL) and Pacific Shipping Trust, trade at around $0.30 (Pacific in US$), with yields ranging from 8% to 16%. All three are trading way below their IPO price, with Rickmers and FSL significantly lower.

When Shipping Trusts were first introduced in SGX a few years ago, they were positioned as defensive yield instruments with stable cash flows as their operating leases were all locked in for the long term. We now know that this is not true as their shipping customers can also default on their lease. Both Rickmers and FSL also unfortunately choose to expand their fleet just before the financial crisis in 2008, which led to them having to do equity fund raising at just about the worst possible time.

I used to own Rickmers (and FSL to a lesser extent) for brief periods of time but have bailed out of them during the 2009 recovery.

With shipping being one of the least favored sectors now, are there brave contrarians investors out there?

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3 comments
Value Investor says 7 years ago

Shipping stock is very hard to predict. It is a cyclical industry. We need to catch the stock at the bottom of the cycle and sell at the peak of the cycle.

Conventional financial ratio like PE, PB are not good enough.

We need to know the outlook for shipping rate in order to do well. Unless you are in the shipping industry, you will not know the outlook.

Reply
Jackson says 7 years ago

Once bitten, twice shy ๐Ÿ™‚

Reply
    Martin Lee says 7 years ago

    Mental block? Have to overcome your psychological barrier…. ๐Ÿ˜€

    Reply
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