I feel history today and do a quick study. Is like a review after a great battle. I am not vested in Oil and Shipping Industry directly but that doesn't mean I should not read up on it. So whatever I find and understand is subjective and conclusion could be wrong.
Started with an article from BT dated FEB 16, 2016.
http://www.businesstimes.com.sg/transport/sembmarine-cosco-buffeted-by-s1-billion-in-combined-q4-losses
"THE strain of low oil prices on the offshore and marine sector was in full display on Monday, as two heavily-exposed Singapore-listed companies reported a combined S$1 billion in fourth-quarter losses."
"The losses were partly the result of the reversal of profits already recognised for the construction of oil rigs and ships that might now never be delivered."
Next, reading latest reported AR.
Profits for 2Q 2016 is $10,737 ('000). Down from 2Q 2015 $113,167('000)
So will we see even a larger crawl back later ?
Debts
And their debts reported increased quite significantly.
Then, i check other announcement and realised they still do Share Buyback. This doesn't feel good when we clearly know the market is not working and if we are using debts to push up prices. What are they thinking ?
http://infopub.sgx.com/Apps?A=COW_CorpAnnouncement_Content&B=AnnouncementLast3MonthsSecurity&F=LYPA1524Z2VRQH6X&H=776398d18e8e71d5142d62155ee307be6b3ba12f8d4ccc813ae7660cfa29046b
Final check on the chart, and I can't help thinking is this industry boosted by loose monetary policy which like Shale Oil build up from debts and more debts except differ in cost foundation and which later pushes it further down the road.
Will it get worst ?
See the chart below.
http://www.bloomberg.com/news/articles/2016-06-28/singapore-s-millionaires-humbled-in-local-bond-restructurings
Conclusion
NAV is $1.2029. Share Price is $1.32. Considering the risk and returns, does it make sense ? Compare to another industry like Property which is still earning quite ok are at 30% discount to NAV. Opportunity cost is not my cost today when it can be really toxic.
Cory
20160807
