Seaspan exposure to CSAV

[gaf63]

Since SSW was discussed here I have followed it but have not purchased any shares , preferring to wait.

Those of you who invested in  SSW are way above me in ability to analyze a co. and presented a good case for this co.

The shape of the world economy and its affects on SSW kept me on the sidelines. 

 

Today on Lloyd's list there is an article on CSAV:

 

http://www.lloydslist.com/ll/news/viewArticle.htm?articleId=20017641703

 

 

 

They are trying to substitute shares for contract commitments, and to delay ships on order, and

there has been no news about the 4250 TEU that was to be delivered to CSAV 3-31-09.  CSAV has 3 more ships on order for delivery this yr.  Next one on 4-30-09.  The rest in Aug and Sept.  CSAV is a small % of SSW business compared to the Chinese lines so I wonder how much effect it will have on SSW.  If the stock market is a guide , not much , cuz SSW is up today to mid 11's.  But it cant be insignificant.  If this stock pulls back  I will invest in it. But not til there is more clarity on their charters and newbuilds.

Those of you who own SSW , what are your thoughts and comments,  Gary

 

 

 

 

 

 

 

[JEast]

I would assume that I am the long bull for the board with this position based on my previous posts over on the old MSN board, but I am hoping that someone can destroy this idea.

 

Yes, CSAV is a concern, but as indicated they only have 4 ships due in total. Seaspan has already announced that they were delaying 3-6 ships this year out of the original 12 scheduled for 2009. One could make an educated guess that of these 3-6 delayed, CSAV makes the bulk of it. However, and on the other hand, the 4 ships with CSAV were of the shortest charter duration of 6 years vs. the normal 10-12 years. Hence, if these ships could be rechartered next year for longer terms, this may be a small bonus. In addition, if CSAV gets recapitalized as a looming possibility, then part of the deal may be to extend the charter length for a slight reduction in payments. Maybe a win-win. --- Slow down -- too optimistic, Always Invert, Always Invert :)  Let us say that CSAV goes away which means this will hurt Seaspan. However, CSAV is not absolutely needed this year which will bust the business model of Seaspan in my view currently. What is of vital importance though is CSCL and COSCO.

 

As a side point that is relevant though is that CSAV's troubles are not with shipping in general but with the fuel hedges that they placed or did not place. If they had not put such a large fuel buy order in near the peak, this may have been all avoided, at least to a degree. Every other year or so, it seems that a company gets into trouble with their commodity purchases whether its is from copper to platinum purchases (i.e. Ford).

 

Cheers

JEast

 

[RusticFrank41]

Financial Times Report:

China Cosco to cancel or delay ship orders

 

The world’s largest dry bulk shipping line plans to cancel or postpone some of its vast portfolio of ship orders, scotching speculation that the transport company might be forced to increase its order book to support China’s shipyards - Apr-23

[Phoenix01]

SSW got hammered today when they lowered their dividend.  The conference call for Q1 is below.

 

http://seekingalpha.com/article/133679-seaspan-corporation-q1-2009-earnings-call-transcript?source=yahoo

 

This may turn out to be a huge opportunity to load up on calls and wait for the dividend to be re-instated.  However, I could not find any 2011 leaps and I do not think that 2010 leaps will necessarily be profitable.

[lessthaniv]

I spent the day on the buy button. This situation is very similar to the H&R Reit situation. The company, through the dividend cut, has effectively reduce and deferred the potential dilution until late 2010. And, the dilution will now be much less. I think the income oriented investor sold off heavily today, but for the long term minded shareholder willing to invest for capital appreciation,  I believe the payoff will be handsome.

 

<IV

[Phoenix01]

It would seem to me that there is no rush to get into this position just yet.  The head winds are still really strong.  I am guessing that during the summer Mr. Market is going to give us a better opportunity.

[Guest kawikaho]

I'm looking at SSW too.  It looks less correlated to the BDI, and is profitable in the current qtr.  Even with the dividend cut, it's yielding over 5%.  I think most companies are looking to cut double digit yields to something around 4-5%.  I think a double digit yield is an indicator of a dividend cut and price drop. 

[lessthaniv]

The trading volume yesterday was 11M shares. Roughly 27X the normal volume of the last month. In the past, Seaspan has preached to shareholders about their internal desire to provide value through consistent, ever-increasing dividends. Yesterday, the direction of the company changed and I think the shareholder base (who were happy collecting income) was caught off guard. I suspect that much of the selling volume yesterday and today is associated with these types of investors beit retail or institutional.

 

The business of SSW just improved. Retaining more of the distributable income makes the company stronger not weaker and it reduces the amount of dilution to the shareholder base in the future. I was on the buy again today. This can certainly trade cheaper ... who knows... but the margin of safety at $7 is adequate for me.

 

Also, a good article was published on Lloyd's List discussing the situtation with CSAV. As mentioned in the article, CSAV only accounts for 3% of Seaspans forward charter revenue. So, some of the recent press surrounding CSAV is likely overblown.

 

http://lloydslist.com/ll/news/seaspan-confident-csav-will-meet-charter-commitments/20017644457.htm;jsessionid=250BBEEFDD8A21D1F70202FF4137D8BF