Fundamental Prospecting - time for another gold rush? 3 1425... · Fundamental Prospecting - time...
Transcript of Fundamental Prospecting - time for another gold rush? 3 1425... · Fundamental Prospecting - time...
Fundamental Prospecting - time for another gold rush? Dr Adam Kent - Maritime Strategies International (MSI) 30th Annual Marine Money Money Week – New York City June 19th to 21st 2017
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Fundamental Prospecting - time for another gold rush?
Agenda
1. Mining the Demand Data 2. Supply Overburden 3. Earning Seekers 4. Price Formation 6. Panning for Prospects
Gold Bullion or Fools Gold?
Mining the Demand Data
Fundamental Prospecting
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Strengthening Product Tanker Market in H2 2017
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1.2Ja
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Apr
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May
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Jun-
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Jul-1
6
Aug
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Index
Jan ForecastFeb ForecastMar ForecastApr ForecastMay ForecastActual
Based on MSI and WoodMac Forecasting Model
MR Tanker TC2 – NW Europe to United States
Model based on trade, refining and pricing signals
Incremental Product Imports
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High stocks
Improving macro position
IMO bunker regulation
Bulker – Incremental Cargo Growth
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Steel production increases
Limited new iron ore capacity, coal squeezed
Coal - Major Demand Risks & Rewards
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China Coal Imports
India Coal Imports
Risks dependent on: • Price • Domestic production • Policy • Environmental regulation • Energy efficiency
Container Panamax Plight
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Pend
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k TEU Jun-16 Jun-17
Cascade coming back into play
Intra Asia Deployment
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intra-SEAsia
SE Asia-China
ChinaDomestic
SE AsiaCabotage
NE Asia-China
NE Asia-SEAsia
Other NEAsia
Cabotage
intra-NEAsia
Share of totalintra-Asia
Trade
Deployment
Vessel Demand on Intra Asia
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0.0
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Mn TEU Deployed
SE Asia-ChinaSE Asia CabotageOther NE Asia CabotageNE Asia-SE AsiaNE Asia-Chinaintra-SE Asiaintra-NE Asia
Organic Chemical Growth 2017-21
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Imbalance will drive trade
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Seaborne Cargo Growth - Positive
Cargo growth positive across the board
Supply Overburden
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Fundamental Prospecting
Supply has been the ‘Party Pooper’
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Supply
Supply
Supply
Supply
Orderbook Improving Picture – for most
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0%
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45%O
il Ta
nker
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LPG
LNG
FCC
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RoR
o/R
oPax
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ship
PCTC
% of Fleet
mid-2015 mid-2017
Orderbook dwindling across main sectors
Orderbook Replacement Tonnage
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ship
PCTC
% of Old Fleet Mn GT 20+ Year Old Orderbook Old as % of Orderbook
Replacement requirement
Success is in their Hands? – Old Tonnage by CoD
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Oil Tankers Bulkers
Containerships Gas Carriers
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Mn GT Cruise PCTC RoRo MPP Container Gas Bulkers Tankers
Contracting Depression
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Supply Side Developments Ta
nker
Bulk
er
Con
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Annual Average Fleet Growth 2017-20:
+2.4% +0.6%
+2.6%
Includes MSI’s current assumptions on scrapping, contracting, slippage and cancellations
Earnings Expectations
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Fundamental Prospecting
Where on the Earnings Cycle Are We?
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Cru
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PCTC
Bu
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LNG
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Con
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anke
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RoR
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Rig
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Based on 60% financing of a 5 Year Old
At Todays Prices it makes Sense for Some
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Earnings Outlook - Generally Positive
Price Formation
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Fundamental Prospecting
The Complete Pricing Jigsaw
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Shipyard Cover is Still Weak +1 Year Out
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South Korea China
Japan Other
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Chinese Shipyard White List No Guarantee
Privately Owned State Backed
Only 30 white list Chinese yards have taken orders in the last year
Elapsed Days Between Contract & Delivery
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Newbuilding Prices are Close to Bedrock
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Years % of Fleet
Costs YoY ChangePrice YoY ChangeYard Forward Cover (RHA)
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Secondhand Prices Development 10 Year old Prices
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Fundamental Prospecting
Panning for Prospects
MSI - FMV
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• MSI Forecast Marine eValuator (FMV) is the first web-based tool to provide forecast and historical price data covering virtually all of the deepsea shipping fleet.
• Data includes forecasts of newbuilding, second-hand prices, 1 year timecharter rates and operating costs for specific vessels.
• MSI FMV draws on MSI’s proven, proprietary models and a consistent cross-sectional view across all principal shipping sectors. It puts asset values in the context of the near term market to enable reliable benchmarking with outputs based on annual averages.
• Coverage:
Crude Oil Tanker
Product Oil Tanker
Dry Bulk Carrier
Chemical Tanker
LPG Carrier
LNG Carrier
Multi Purpose
Containership
PCC/PCTC
www.msiltd.com/fmv AHTS PSV
Where are the Biggest Nuggets?
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Year of divestment
IRR Returns – 5 Year Old
MSI’s ABS Shadow Rating Model
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Descriptive Statistics MSI Approach Traditional
Shipping
Earnings forecasts (Cycles accommodated) Yes No
Conditional (time varying) volatility Yes No
Opex and scrap value forecasts (model derived) Yes Yes
Ability to stress the forecasts with endogenous and exogenous scenarios Yes Only Proxy Based
Stable calibration procedures Yes No Copula based dependency Yes No Model based Enforcement delays Yes No
Costs estimates for enforcements Yes Only anecdotal experience
Model based (time varying) recovery estimates Yes No
Risk based pricing tool for asset values Yes No
Accommodate credit enhancements (cash cushions, dividend playouts etc.) Yes Subjective or
experience based
Sensitivity to input parameters Yes No
The model is similar to those applied by rating agencies, but with enhanced data, econometrics and inputs. The model incorporates volatility wrapped around cyclical trends, enforcement and recovery scenarios and targeted optimisation of loan structure. The model provides a detailed view on the point-in-time, PD, LGD and EL and is used by banks towards IFRS9 compliance. Primary and secondary debt portfolios are also typically shadow rated using our models
Increased likelihood of default
Expected “softening” of the markets increases likelihood of default
Levered IRR's should be treated with caution due to a concentration of risk (PD) in a cyclical trough
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For over 30 years, MSI has developed integrated relationships with a diverse client base of financial institutions, ship owners, shipyards, brokers, investors, insurers and equipment and service providers. MSI’s expertise covers a broad range of shipping sectors, providing clients with a combination of sector reports, forecasting models, vessel valuations and bespoke consultancy services. MSI is staffed by economists and scientists offering a structured quantitative perspective to shipping analysis combined with a wide range of industry experience. MSI balances analytical power with service flexibility, offering a comprehensive support structure and a sound foundation on which to build investment strategies and monitor/assess exposure to market risks.
MSI Background
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While this document has been prepared, and is presented, in good faith, Maritime Strategies International assumes no responsibility for errors of fact, opinion or market changes, and cannot be held responsible for any losses incurred or action arising as a result of information contained in this document. The copyright and other intellectual property rights in data, information or advice contained in this document are and will at all times remain the property of Maritime Strategies International.
Disclaimer
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