Post on 08-Nov-2014
description
transcript
The Valuation of ShipsArt and Science
ByRoger Bartlett,
Managing Director, Maritime Strategies International Asia Pte Ltd
For Marine Money’s6th Annual Korean Ship Finance Forum
Busan1st November 2012
1© Maritime Strategies International Ltd.
Maritime Strategies International
MSI est. 1986
Valuations
Business Advisory Services
London and
Singapore
Shipping Market
Forecasts-all sectors
2© Maritime Strategies International Ltd.
Shipping banks, funds and financial Institutions
Shipbuilders, Class, Ship managers,
Public Sector, and others
Major ship owners and charterers
and traders
Clients from all parts of the shipping industry and across the globe..
High level, independent shipping market forecasts and business advisory services to the shipping and its
allied industries
MSI values all types of ships (incl. offshore)
3© Maritime Strategies International Ltd.
Outline
The Valuation of Ships
A. Elements of a ship valuation
* 1.Newbuilding, 2. Scrap prices, 3. Second-hand prices and 4. Forward Valuations
B. What impacts ship values?
* Falling scrap prices, New technology and economic trauma
C. Where will prices go next?
D. Conclusions
* Systematic approach pays dividends, risks & rewards, buy/build now?
4© Maritime Strategies International Ltd.
B. ELEMENTS OF A SHIP VALUATION
MSI The valuation of ships
5© Maritime Strategies International Ltd.
What Determines Secondhand Vessel Prices?
• Current Replacement Cost - Sets Upper Reference to S&P Market(Yard Prices: Highly Unstable; Major Market Risk)
6© Maritime Strategies International Ltd.
• Residual Scrap Values - Sets Floor to S&P Market ($/LDT:Limited Influence or Up-/Downside Risk)
• Expected Earnings - Sets Depreciation Rate(TC Rate, Vessel Life Expectancy)
• Sale Timing and Operational Specifics - Sets Exact Price(e.g. Proximity to special survey, vessel condition )
1. NEWBUILDING PRICESElements of a Ship Valuation
7© Maritime Strategies International Ltd.
New building price drivers
Shipbuilding Price Index ($/CGT)
Yard costs
Global Ship building Capacity
Global NewbuildingOrderbook
8© Maritime Strategies International Ltd.
FORWARD COVER
0
500
1,000
1,500
2,000
2,500
3,000
3,500
0 1 2 3 4 5
$ CGT
Years Forward Cover
$ CGT Price (1980s)
$ CGT Price (1990s)
$ CGT Price (2000 to 2004)
$ CGT Price (2005 to 2008)
$ CGT Price (2009 to 2010)
Forward Cover and Price
9© Maritime Strategies International Ltd.
1 to 2 Years
3 to 4 Years
• During the 1980’s and 1990’s FC remained in a 1 to 2 year bound
• During the mid 2000’s FC reached 4 years
• Forward Cover (FC) is a measure of the aggregate orderbookacross all sectors compared with total available global shipyard capacity and is measured in years
New building prices move in tandem across sectors
10© MSI Asia Pte Ltd
0
10
20
30
40
50
60
70
80
90
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Mn US$ Newbuilding Contract Price
Aframax Tanker
Panamax Bulker
1.1kTEU FCC
24kCuM LPG Carrier
2.5kLm RoRo
Yard costs and prices diverge
11© MSI Asia Pte Ltd
0%
50%
100%
150%
200%
250%19
80
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Index (2003=100) Yard Cost Versus Price
Av Yard Cost
Av Price
2. SCRAP PRICESElements of a Ship Valuation
12© Maritime Strategies International Ltd.
Scrap Price
13© Maritime Strategies International Ltd.
• Scrap price is a function of steel price, local steel demand and scrapping volumes
• Steel from scrapped ships makes up a small fraction of total scrap steel sales (approx. 10%), which is dominated by scrap auto sales
0
5
10
15
20
25
30
0
100
200
300
400
500
600
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Mn GT
Ship Scrapping Volumes (RH Axis)
Scrap Price ($/LDT)
Steel Price Index (1980 = 100)
3. SECONDHAND PRICESElements of a Ship Valuation
14© Maritime Strategies International Ltd.
Second hand prices
15© Maritime Strategies International Ltd.
• All historical secondhand prices are converted into a net replacement value for the individual ship:
• NRV = (2nd hand price – scrap price in YoS)
(Newbuilding price in YoS – scrap price in YoS)
• This (expressed as a %age) allows us to compare all prices over time independent of both new building and scrap prices
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
0 5 10 15 20 25 30
NRV
Age at Sale
Actual Transaction
Line of Best Fit
NRV Plotted – Sales Since 1990
16© Maritime Strategies International Ltd.
Panamax Bulker
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
0 5 10 15 20 25 30
NRV
Age at Sale
Intermediate Market
Trough Market
Peak Market
Super Cycle
Depreciation and Earnings Relationship
17© Maritime Strategies International Ltd.
Large Capesize Bulker
Depreciation and Earnings Relationship
18© Maritime Strategies International Ltd.
0%
20%
40%
60%
80%
100%
120%
140%
0 5 10 15 20 25
NRV
Age at Sale
Intermediate
TroughPeak
Super Boom
Large Capesize Bulker
Depreciation and Earnings Relationship
19© Maritime Strategies International Ltd.
0%
20%
40%
60%
80%
100%
120%
140%
5 10 15 20
NRV
Age at Sale
1990 1993 1996
1999 2002 2005
2008 2011
Handymax Bulker
Price and Earnings Relationship
20© Maritime Strategies International Ltd.
Panamax Bulker
0
10
20
30
40
50
60
70
0%
20%
40%
60%
80%
100%
120%
140%19
8019
8119
8219
8319
8419
8519
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
10
‘000 $/dayNRV
10 year NRV Net Earnings (RH Axis)
Correlation = 0.90
Secondhand Values
Secondhand prices can be expressed as Net Replacement Values
• Removes the steel element and allows comparisons over time
Shape of depreciation curve is driven by earnings environment
• The poorer the earnings environment the more concave the depreciation
Net Replacement Value can exceed 100% in very strong earnings environment
21© Maritime Strategies International Ltd.
Forward valuations: the added dimension
New building
price outlook
Earnings forecasts
Scrap price outlook
22© Maritime Strategies International Ltd.
Shipyard, specifications,
design, proximity to survey, trade,
previous owners, flag..
0.00.51.01.52.02.53.03.54.04.55.0
2010 2015 2020 2025
Tank
Bulk
Cont
Forward ValuationsAssessment of
residual risks and rewards – banks, owners, insurers,
investors
B. HOW DO ISSUES IMPACT ON SHIP VALUES?
MSI Vessel Valuations
23© Maritime Strategies International Ltd.
24© Maritime Strategies International Ltd.
0
10
20
30
40
50
60
70
80
0 5Year 10Year 15Year 20Year 25Year
Young Ships face min risk
Newbuild Price
Scrap Price
Older ships values at greater Risk
Effect on values of falling scrap prices
New technology reducing life expectancy
25© Maritime Strategies International Ltd.
0
10
20
30
40
50
60
70
80
0 5Year 10Year 15Year 20Year 25Year
Values of younger ships face small risk
Newbuild Price
Scrap Price
Old Ship values face maximum risk
Charter markets at rock bottom
26© Maritime Strategies International Ltd.
0
10
20
30
40
50
60
70
80
0 5Year 10Year 15Year 20Year 25Year
Young Ships Face Max Risk
Newbuild Price
Scrap Price
Old Ships Face Min Risk
C. WHERE WILL VALUES GO NEXT?
MSI The Valuation of Ships
27© Maritime Strategies International Ltd.
Newbuilding Prices Outlook
28© Maritime Strategies International Ltd.
1.0
1.5
2.0
2.5
3.0
3.5
4.0
50%
75%
100%
125%
150%
175%
200%
225%
250%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
YearsIndex (2003=
100)Forward Cover (RH Axis) Av. Yard Cost Av. Yard Price
FC to drop below 2 years
Yard costs to remain at record highs
Yard costs pressure willhelp maintain
newbuilding prices
Earnings Outlook
29© Maritime Strategies International Ltd.
• Earnings forecast will trough over the next 18 months for the main sectors
• Bulkers will hit lows first shortly followed by tankers and then containerships
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Index(2003 =100) Container Bulker Tanker
2007 = 317%2008 = 327%
5 Yr Old Price Outlook
30© Maritime Strategies International Ltd.
0
10
20
30
40
50
60
70
80
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Mn US$ Panamax Containership Panamax Bulker Aframax Tanker
Downward pressureNB Price & Earnings
Scrap price offerssupport for ageing
tonnage
Newbuilding Prices
Newbuilding Prices
Q3 2012 Medium Term Outlook
31© Maritime Strategies International Ltd.
Newbuildingprices declining over the next 12
months
More downside if capacity remains
open / operational
Scrap PriceScrap Price
Scrap prices to support older ship
values
$LDT price firm due to local scrap steel demand and global steel price
EarningsEarnings
Supply / demand balances skewed towards supply side for main
sectors
Gradual and sustained recovery in earnings during H2 2013 for most
sectors / sizes
2004 blt VLCC price history and outlook
32© Maritime Strategies International Ltd.
0
20
40
60
80
100
120
140
160
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Ordered
2002 $66M
Delivered 2004
$105M (resale)
2012 approx$46M
Conference VLCC value tracking
33© MSI Asia Pte Ltd
-
20
40
60
80
100
120
140
160
180
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
NB
0
5
10
15
20
Scrap
MM KoreaVLCC
MM Korea VLCC (blt. 2004) value over time
34© Maritime Strategies International Ltd.
Concluding thoughts
• Critical Element in decision making• Based on fundamentals and Independent• Future valuations permit assessment of residual
risks
Systematic approach to valuations
• Charter rates affects modern ship values most• New technology leads to dual/multiple markets• Changes in Scrap prices > impact older tonnage
Risks / Rewards
• New building prices bottom out 2013• Oversupply depressing markets affect modern
tonnage values more.. • Secondhand could provide good opportunities
“distressed” assets hard to find
Buy / Build now ?
35© MSI Asia Pte Ltd
London:2 Baden Place
LondonSE1 1YW
Tel: +44 (0)207 940 0070Fax: +44 (0)207 940 0071Email: info@msiltd.com
Maritime Strategies International Ltd
Singapore8, Shenton Way
#12-01, AXA TowerSingapore 068811
Tel: +65 6427 4180Email: roger.bartlett@msiltd.com
www.msiltd.comHigh level, independent ship market forecasts, valuations and business advisory services for shipping and allied industries