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JEast

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I had a giggle today.

 

Back on Aug 25th/2009 Cramer was asked about Seaspan in the Lightening Round. He said, and I quote: "You are doomed... Here's one... I would rather watch C-Span, than own Seaspan!"

AUG 25th/2009: Stock price was $6.50

 

(source: http://seekingalpha.com/article/158275-cramer-s-lightning-round-better-watch-c-span-than-buy-seaspan-8-25-09 )

 

Yesterday on the mad money fund blogspot Cramer picks his best stocks of 2010. His #1 listed January pick C-Span, I mean Seaspan - with a $12.75 target.

 

JAN 09/2010: Stock price was $10.30

 

(source: http://www.madmoneyfund.blogspot.com/ )

 

The guy needs help!  ???

 

<IV

 

 

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http://joc.com/node/415886

 

 

Container Imports Increase after 30-Month Decline

Bill Mongelluzzo | Jan 11, 2010 6:14PM GMT

The Journal of Commerce Online - News Story

 

    * Ports/Terminals

    * | Container Shipping

    * | Maritime

    * | United States

 

Long downturn reverses in December; industry poised for growth

 

U.S. container ports finally turned the corner in December, with imports estimated to be higher than in December 2008. This would mark the first year-over-year monthly increase in containerized imports in two and one-half years.

 

According to the monthly Port Tracker published by the National Retail Federation and Hackett Associates, year-over-year increases in imports are projected to continue for the next six months.

 

However, while growth rates compared to the same months in early 2009 will appear large, the rate of increase will be modest compared to the second half of 2009, said Ben Hackett.

 

"Although the first five months of 2010 are forecast to post large increases over the same period of the prior year (20.2 percent for the monitored West Coast ports and 13.1 percent for the monitored East Coast ports), growth rates for the prior five months are expected to be small," Port Tracker stated.

 

Although the exact December numbers have not yet been calculated, it appears that 2009 ended with a total import volume of 12.7 million 20-foot equivalent units for the 10 U.S. ports covered by Port Tracker. That represents a 17 percent decline from 2008 and the lowest annual total since 2003.

 

Nevertheless, it appears that the industry is poised for growth in 2010 as the U.S. consumer returns to the stores. "Retailers are still going to be cautious with their inventories, but we wouldn't see these increases in imports if stores weren't expecting sales to improve," said Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation.

 

"The U.S. economy is experiencing positive growth, with imports on the rise as a result of re-stocking and a rising consumer demand," Hackett said.

 

In related developments, Port Tracker noted that the active vessel capacity of the top 20 container lines dropped 2.4 percent in 2009. Capacity management will remain a key carrier strategy in 2010, and this could force freight rates to increase.

 

Carriers will continue other cost-cutting measures such as slow-steaming to reduce fuel consumption. This will result in longer transit times and will put pressure on supply-chain management.

 

Dan Smith, a principal with the Tioga Group, said prospects in 2010 for the intermodal railroads, trucking companies and freight intermediaries also appear to be positive.

 

"If the ocean carriers can be described as 'cautiously optimistic,' the U.S. railroads could be described as 'cautiously hungry,'" Smith stated in Port Tracker. He noted that both the western and eastern railroads are expanding their mainline capacity and inland hubs in anticipation of growing cargo volumes.

 

Contact Bill Mongelluzzo at bmongelluzzo@joc.com.

 

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Yes, similar yet different. Here are a few points of comparison to get you going:

 

1. DAC is #2 in size behind SSW.

2. DAC has historically had lower payout ratios choosing to retain more cashflow and thereby lowering their need to tap equity markets.

3. DAC has historically run with higher leverage.

4. DAC has shown they will take on higher risk by investing in older ships and playing the spot market a bit.

5. DAC is more dependent on the debt capital markets because of their model.

6. DAC has market value based loan covenants, which allow the company to borrow funds by attaching vessel values to charter-related cash flows although this drives the debt to capital ratios rather high. (North of 80%). They recieved waivers for breaking some loan covenants that I believe expire this fall.

7. DAC's fleet is older than SSW and the industry average.

8. DAC's  average age is 11-12 years, SSW average age is 5-6 years, industry average 8-9 years.

9. Older ships have higher costs (repair, insurance) and therefore leased at lower rates.

10. DAC had quite a few ships expiring as I recall. Greater than SSW when I compared and they are older ships.

11. DAC does not provide as much clarity around their charter rates or partners, as SSW. A little less than 2/3rd of their charter partners & charter rates are "unknowns" as they are bound by non-disclosure agreements. Makes you wonder how many "ZIM's" are counterparties?

12. Danaos advances funds to its Manager in order to pay for regular operating expenses. Unlike Seaspan, Danaos does not disclose

operating costs that are fixed over a given period.

13. Danaos only has 20% float. 80% owned by Coustas.

 

I think the valuation is lower because of the higher leverage, older ships, and general lack of disclosures compared to SSW.

 

<IV

 

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http://www.nytimes.com/2010/02/11/business/global/11yuan.html?hpw

 

Healthy Jump in Chinese Exports Points to Recovery in World Trade

 

   

By KEITH BRADSHER

Published: February 10, 2010

 

HONG KONG — China said Wednesday that its exports climbed 21 percent in January from a year earlier, while imports surged 85.5 percent, the latest sign that world trade is starting to recover from the global financial crisis.

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The Takeaway With Louise Story

 

China exports increased somewhat less than expected: The consensus of economists had been that exports increased 28 percent. But the healthy jump last month could still fuel further calls from the United States and the European Union for China to break the peg of its currency, the renminbi, to the U.S. dollar and allow the renminbi to appreciate.

 

China’s exports have recovered more rapidly than those of most countries, partly because the low value of the renminbi has kept Chinese goods relatively inexpensive in foreign markets.

 

The rebound in Chinese exports has been so rapid that some factory executives in the Pearl River delta region near Hong Kong have begun complaining of shortages of empty steel containers in which to ship their goods. Container shipping companies have begun to raise freight rates and remove discounts introduced in response to the financial crisis.

 

“With the export recovery taking hold more strongly, the outlook for export manufacturing, ports and container shipping sectors appears to be brighter, compared to last year,” Jing Ulrich, the chairman of China equities and commodities at J.P. Morgan, said in a research note.

 

Imports in January rose impressively, in line with economists’ expectations, because imports a year ago were so weak. Many Chinese export factories nearly stopped buying raw materials then as their orders dried up, but they have been restocking since late spring.

 

Exports and imports both benefited this year from the timing of Chinese New Year, which will be Sunday. It fell on Jan. 26 last year, and a weeklong holiday at the end of January last year helped curtail economic activity in China.

 

The China trade surplus was $14.17 billion last month, compared with $18.43 billion in December and $39.1 billion in January of last year, according to figures released Wednesday by China’s General Administration of Customs.

 

The trade statistics are the latest sign of China’s robust economic health, even as most of the rest of the world struggles to recover from the financial crisis.

 

The China Association of Automobile Manufacturers announced Tuesday that auto sales in China had surged 143 percent from the level of a year earlier and production had leaped 124 percent.

 

A few analysts had expressed fears that auto sales might be weak in January because the government had partially rescinded a sales tax cut for cars with engines of 1.6 liters or less. Having cut the tax to 5 percent a year ago, from 10 percent, the government raised it to 7.5 percent at the start of this year.

 

But car ownership remains extremely popular in China, where personal incomes are rising and consumer confidence is strong. Car dealerships in China have weeks-long waiting lists for many models, and months-long waiting lists for some of the most popular models.

 

The A-share index on the Shanghai stock exchange closed 1.1 percent higher Wednesday, after getting an early boost from the auto sales figures, which had been released after the close of trading on Tuesday.

 

China’s snapshot of its January trade data Wednesday came the morning after Germany released official data confirming that it had lost its status as the world’s leading exporter, as China overtook it.

 

Chinese exports amounted to $1.2 trillion in 2009, while German exports totaled $1.1 trillion, the German Federal Statistical Office said.

 

Aside from China’s sheer size, it was the global economic downturn that propelled China past Germany as the top exporter. Germany’s main trading partners, the United States and the European Union, cut back on investments, while consumers trimmed their spending and banks reined in lending.

 

Judy Dempsey contributed reporting from Berlin.

Sign in to Recommend More Articles in Business » A version of this article appeared in print on February 11, 2010, in The International Herald Tribune.

 

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Packer, here are 2 sources.  The first shows rates from German brokers , the next an article on generalized rates for different size ships.  Interesting that at the height of the market 3 mo. rates for 3500 teu was 100% > than SSW rates , but at moment

they are about 28% of SSW rates.  No wonder CSAV wants to renegotiate.

 

http://www.vhss.de/containership_time-charter-rates_eng.php#

 

Mostly small ships , but last chart shows rates for 3400 14t/teu

 

http://www.joc.com/maritime/container-ship-charter-rates-rise-demand

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Seaspan Corporation (NYSE:SSW - News) announced today the delivery of its 44th and 45th vessels, the Guayaquil Bridge and the COSCO Japan.

 

The Guayaquil Bridge, a 2500 TEU vessel delivered on March 5, 2010, was built by Jiangsu Yangzijiang Shipbuilding Co., Ltd. It is on charter to Kawasaki Kisen Kaisha Ltd. ("K-Line") of Japan under a ten-year, fixed-rate time charter. The Guayaquil Bridge is the first of seven Seaspan vessels to be chartered to K-Line.

 

The 8500 TEU COSCO Japan, which was constructed by Hyundai Heavy Industries Co., Ltd., was also delivered on March 5, 2010. The COSCO Japan is on charter to COSCO Container Lines Co., Ltd. ("COSCON") of China under a twelve-year, fixed-rate time charter. It is the third of eighteen vessels to be chartered by Seaspan to COSCON.

 

 

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Seaspan reports:

 

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=452161

 

"- Achieved utilization of 99.7% for the quarter and year;

 

- Accepted delivery of seven newbuild vessels in 2009 and three vessels to date in 2010 to increase the operating fleet to 45 vessels. With the delivery of an additional 23 vessels, Seaspan is expected to grow its contracted revenue stream to approximately $7 billion;

 

- Strengthened our capital structure and financial flexibility through completion of the $200 million aggregate issuance of the Company's Series A Preferred Stock;

 

- Reduced our equity capital needs by up to 80% to $180 to $240 million from $900 million at the beginning of 2009. Deferred some of our equity needs by a year to second quarter 2012 from second quarter 2011;

 

- Paid a third quarter dividend of $0.10 per share on November 19, 2009;

 

- Paid a fourth quarter dividend of $0.10 per share on February 12, 2010, increasing cumulative dividends to $6.49 per share; ............................."

 

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Thanks for the rates source gaf.  It looks like SSW is streaming along with a current CAD yield of 19% and low-end forward 23% yield if they finance the rest of their ships using equity only.  If this was trading like a triple-net real estate REIT at about an 8% yield, it would have a price in the low 20s on current yield and the high 20s on forward yield assuming all equity dilution (which management has stated they will avoid at all costs).  In addition, these guys are opportunistic buyers who could also buy up some capacity if it is available on a liquidation basis. 

 

Packer 

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Rustic,

 

You need to have a look at distributable cash. It's more meaningful long term. Seaspan decreased their dividends significantly from $1.91/share to $.40.share. You are referring to the current yield ($.40/$10). Packer is concerning himself with what Seaspan has the ability to pay long term based on cashflows.

 

Remember, Seaspan cut the dividend opportunistically to retain the money within the company and to assist in paying for the newbuild commitments (which are already under charter). At some point Seaspan will have built and delivered all their newbuilds and they will have little need to retain capital in the business. It's extremely likely that Seaspan will then reinstate their higher distribution policy.

 

Realize that while dividends received have decreased recently, the company has continued to improve their financial strength over the last 18 months.

 

I think most retail investors are looking at current yields which I believe is a big mistake.

 

Packer, I can tell by your comments that you've mabye had your  "A Ha" moment with regards to Seaspan?  Let's hope we're right!

 

<IV

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Sorry, I should have added this:

 

At some point Seaspan will have built and delivered all their newbuilds and they will have little need to retain capital in the business. It's extremely likely that Seaspan will then reinstate their higher distribution policy...

 

It's also likely that Seaspans distributable cashflow can grow north of their previous levels ($1.91/share) even including potential dilution. Over the next couple of years, the operating fleet of Seaspan will grow by at least 14 ships (I did the math on this in a previous post taking into account some pretty conservative assumptions, imo).

 

I think it's safest to just go with around $1.90/share again after dilution, but you can do the math any way you want to satisfy yourself.

 

In the end, it would appear there is a wide margin between the current yield, and the likely future yield including dilution. (nice margin of safety).

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mranski,

 

you can obtain the distributable cash for 2009 from the press release. About $155M. The company explains how that number is calculated as follows. (Note 2)

 

Cash available for distribution is a non-GAAP measure that represents

    net earnings adjusted for depreciation, amortization of deferred

    charges, non-cash undrawn credit facility fees, write-off of deferred

    financing fees on debt refinancing, non-cash share-based compensation,

    dry-dock adjustment, non-cash interest income, change in fair value of

    financial instruments, interest expense, cash interest paid at the

    hedged rate and other items that the Company believes are not

    representative of its operating performance. Please read "Reconciliation

    of Non-GAAP Financial Measures for the Quarter and Year Ended

    December 31, 2009 and 2008 - Description of Non-GAAP Financial

    Measures - A. Cash Available for Distribution" for a description of cash

    available for distribution and a reconciliation of cash available for

    distribution to net earnings.

 

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Thanks. What I was asking is why you analyze the value of this stock using cash flow instead and net income and p/e ratio. I've been in a number of trusts where cash flow and distributable cash seems very good but the net income isn't there and they eventually had to reduce distributions. To me this is a $10 stock earning $1 per share so it's earnings yield is 10%, a pretty fair valuation, undervalued maybe but not by a huge amount.

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After looking at FUR and Other REITs I would be fine marking down CAPEX significantly. We have $10 and $2 in cashflow. Replacement capex at depreciation seems a bit high to me, given that these are 30 year assets which can be sold during peaks of the market and bought during downturns. The question is whats a good percentage of depreciation to use for the markdown. Maintenance is already built into the Cashflow number.

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The main reason to use cash flow, imo,  is because of SSW's use of interest rate swaps to cap interest at 6%.  These swaps are marked to market each qtr. and can add or subtract from normal earnings.  Plus this co. has historically paid out a high % of cf  in divs.  Once all funding for ships is taken care of , the div. will or at least I hope so be raised back up to the $1.90 level

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what I should have written was , back to the 1.90 level that less>iv mentioned above.

This idea was Less > iv and J east's around a yr. ago now, and both have written  posts on SSW, with

Less>iv posting extensive numerical analysis.  I want to  thank both of you.  For I think this will be at least a 3 bagger on my original investment, and am looking to invest more.  

  The problem I had a year ago  was not understanding the interest swaps, and the possibility of charters breaking their contracts.  Still dont really have a grip on the swaps but they made it through the last yr. w/o problems with the counterparties and banks.  As to contracts , close to the worse yr. ever for container co. and no one , at least yet , has broken their contracts.  CSAV restructured and asked for a redo , but SSW said no and the contracts are intact.  HL also asked but were told no, and  for now the contracts are intact.   CSAV  at moment only has 2 ships on charter, with 2 more to be delivered which could be a problem but a small one.  So , this gives me confidence that the charter contracts are solid and  will remain in place for their time period.

   CEO Wang stated in the CC that there are 10 more ships to be delivered this yr. , and that some charter parties have asked for move ups to their delivery dates. So it appears with container prices improving the lines are thru the worst of the crisis and are ready to take their ships.  The over supply issue of idle ships is still there but slow steaming, scrapping and improved demand for containers is lessening its effect.  So I believe SSW is through the worst , and will start delivering their ships , increasing their cash flow and dividend.  As to numbers, even if they dilute up to 115 mil shares, and pay out 75% of cad(when all ships are delivered),  the div. should range from 1.70 to 1.95.  W/O dilution, much much better,

GAF

 

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