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I know what you mean about the Simply Wall St article, it might have been mathematically correct but the absence of any context was shocking, any knowledge of the shipping sector explains the information although it might not change it.
I think the BHSI is becoming a big proxy for the state of the Chinese economy andIi am amazed that the BHSI is now below the early Covid levels of the first half of 2020..
Hope your jury service is going well!
For those interested in further benchmarking have a look at the latest results out last week for Eagle Bulk Shipping Inc. The business was started in 2005 and is listed on the NYSE. It is possibly the biggest global owner of Supramax and Ultramax vessels with 52 , average age 10.0 years, they were one of the companies bidding for Grindrod last year. They have had an interesting year of shareholder upheaval and currently in a period of buying back some of their own shares.
Their net income for Jan- June 23 was $21m but their NAV dropped a massive 25.7%, from $819m to $609m (in the same period the TMIP NAV dropped only 6.4% , from $552m to $516m. Also the Eagle Bulk market capitalisation is around the same as the June NAV while the current TMIP market capitalisation is around 40% lower than the June NAV. And TMIP pays out a bigger dividend.
I know which one I would rather have!
Krusty et al, good that we can all chip in with information and views!
On your 4 points- dividend is maintained at the moment, but 2 cents every quarter is costing TMIP. $6.6 m every 3 months and with gross operating profit below this figure in Q1 and very likely the current quarter then the dividend cover is gone unless vessel values increase or the dividend is paid for out of vessel disposals. So we really need that expected upturn in the market.
Regarding disposals as you point out it is a balance and I agree that TMIP needs to get the debt down a bit more. The vessel disposals tend to be the older and Chinese vessels. It also depends on where you think we are in the vessel cycle, better to sell vessels now if they are barely profitable and you think the value could be lower in 12 months and vice versa, in contrast Pacific Basin have been buying vessels but they have considerably less debt and a chunk of cash in the bank.
I agree with what you say about TMI/Grindrod going forward, cost savings are being made and from a debt point of view i suppose TMIP does not want to buy the remaining 17% of Grindrod but I would think that it is worth buying up Grindrod shares on offer on Nasdaq/JSE at around $9-10 each. As you say, we will hopefully find out later this year.
The old Pacific Basin was co-founded by Christopher Buttery in 1987 before re-establishing the current Pacific Basin in 1998, taking it public and 2004 and eventually leaving at deputy chairman in 2007. Just one year out of university, Ed Buttery worked at Pacific Basin as chartering manager before moving on to bigger things. So the family philosophy while at Pacific Basin will be a template for TMI and no doubt in 20 years time Ed will want the business to b as big as Pacific Basin.
I suppose it is reassuring that the views of both businesses are similar but obviously they are using the same trusted recipe !
Hi Sam, yes, the dividend at 2 cents/quarter or 8 cents/year currently works out at about 8.2% dividend yield at a share price of 76p. But I would still urge some caution for the time being. In the FY 2022 numbers the gross operating profit was $111.91 m , for April-June this has dropped to around $5 m and for the current Quarter, if the BHSI does not recover, it is likely to be around zero to $3m so the forward dividend cover is certainly under pressure unless things improve. The end of June total NAV of $516m was down $50m over the 3 months, almost entirely due to the bigger reduction in vessel values. So we are extremely reliant on vessel values holding up.
As you point out the bigger BDI is doing relatively better than the BHSI which is a good sign for the BHSI but it is all about timing. In the Q1/23 trading update TMI expects "improved rates in latter part of 2023" but I think we might be a month or two away from the start of this turn-round. In the meantime if the BHSI does not go positive, I see the share price tipping under 70p. So I would suggest holding fire for the next few weeks/months until the BHSI has turned and then top up, The 2024 handy vessel demand -supply fundamentals looks absolutely superb and if correct I expect a doubling/tripling in the BHSI between now and the end of 2024. DYOR
Having looked in more detail at the August Grindrod EGM, I realise that I have got it totally wrong. I originally thought it was designed to buy out the 17% minority shareholders. But now I see it is a suggested cash distribution of up to $45m, funded by recent vessel sales, to ALL shareholders and with 19.47 m shares that is where your $2.3/share comes from. Surely this is just a formality and as the majority shareholder with 83.23% of the shares then TMI will get $37m and use it to pay down the debt.
Sam/all, i was very happy with the FY accounts , which as most people have commented ticked all of the boxes on TC's significantly higher than the index, reducing debt, maintaining dividend, divi cover , integrating Grindrod etc. Given the difficult year it was pleasing to see NAV/share down only 1.6% over the period. In particular I liked that the 86% fair value in Grindrod was based on actual vessel values and operating performance rather than the Grindrod share price or what TMI had actually paid for the Grindrod shares,, that way we are comparing apples with apples and shows that the share price at a 34.7% discount to NAV is real.
While the BHSI continued to fall in April-June and TC's continuing to remain profitable i had hoped for a tiny improvement in the NAV/share but it looks like vessel values dipped about 6% in the Quarter when we might have expected about 1% natural depreciation with vessels 3 months older. Sadly the NAV/share at 31st June of $1.56 was down a big 8.8% on the Quarter although it still represents a 38% discount to the share price at the time. Since then the BHSI has continued to fall and today at 396 is the lowest since June 2020. Unfortunately if this does not turn round in the next few weeks we can expect a further reduction in NAV/share and possibly share price in the current Quarter.. In the Quarterly report the Company has once again ticked all of the boxes , and with interest rates currently above 6% have already agree one vessel sale and probably need one more big vessel sale or 2 smaller/older vessel sales to get the debt ratio below 25% which sounds logical given the current low profitability (particularly if you think TMI is going to offer to buy the remaining 14% Grindrod shares at the current market price plus $2.30 which would still be a discount to NAV, is this why TMI is strangely selling 2 vessels to Grindrod?).
As I have said before, TMI operates in a highly cyclical industry and shareholders have to realise this. TMI is doing all of the right things but cannot buck the market in the long term. But once the market turns we could see a significant jump in the share price nearer the NAV/share.
Sam, interesting!, Thanks for the info, i usually look at the Nasdaq Grindrod press releases but it is not on there. but looking at the JSE Grindrod Shipping SENS it is on there. I suppose the $2.3/share is from your "contract" only which sounds an enticing carrot with the current share price around $9 but II suppose the devil is in the detail. The options for the minor shareholders with less than 17% of the total company are rather limited ,the dividend has not increased in 3 years and the share price is considerably lower than the $21+5 that they could have had in December.
Sam, Grindrod paid $0.03/share dividend on 19th June in respect of Jan- March Quarter results released on 17th May (see Nasdaq Grindrod-press releases). Grindrod made a loss of $4.3 m in Jan-March or $0.22/share.
Also have a look on Seeking Alpha on their Grindrod article on 5th July.
....ha ha, just sitting watching at the moment.
My theory is that the BHSI moves in 2 year cycles (2014 -39%, 2015-42%, 2016 +109%, 2017 +5%, 2018 -5%, 2019 -18%, 2020 +39% ,2022 +117%, 2022 -55%, 2023 YTD -39%.
So later this year I will look at adding for the next upward cycle.
Krusty/Sam, annual report for last financial year out tomorrow so that will give us more information.
Then April-June NAV report out on 28th July, I expect a tiny improvement in NAV, say 1p/share -every little helps!
BHSI unchanged yesterday. Chinese economic numbers have been disappointing over the last few months but see to be turning upwards again.
Bangrak, I assume your $95m net is for for 2024,? I still expect over $130m (and turnover over $700m) although it depends on what volumes and prices you use.
For their 2024 estimate Tamesis have used a rhodium price of $11750 which is their estimate from last September and they have not changed any of their numbers since then.
I spotted the comment but just think it is Tamesis talking the price up, I agree with Moneyman that they would probably want to de-risk Karo first.
Having studied the recent Q3 production numbers in more detail I am particularly pessimistic for the expected Q4 numbers and increases the Cost of Sales which reduces my H2/23 NPAT to $41m.
Ian, please be assured I am not having a go at you and accept you are just repeating what Tamesis have said.
I have just looked at their 12th July presentation prepared the day before, and they are working with a 2023 PGM basket price of $2121/tonne but Tharisa has already told us the price for the first 9 months is $2046 and the current basket price is under $1500. Tamesis would need a PGM price in Q4 of $2309 to achieve an average for the year of $2121.
So their 2023 turnover is dramatically overstated IMO (although they have slightly understated the chrome price).
Being paid by Tharisa, i assume they don't want to have an embarrassing PGM price. But surely if they want their report to be respected and believed then they should use more accurate numbers.