Singapore Shipping Corp

[CY09]

Only works if you are going to pass it down for generations to come. This is because your actions have to be aligned to the controlling shareholder.

To them, this is a family run business and the accumulated wealth can remain in the company's balance sheet perpetually. So yes your interest has to be aligned to them where you continue to hold the shares with little dividends given but NAV growing. Similar to the idea of berkshire albeit with little share buybacks done and market being doubtful that Opmi will ever realize the full NAV

[fallscushion]

That I agree, it's a long grinding game, isn't that the same for most investment in business (except high tech? fast boom quick bust?).

If it's not listed (and no share price movement), we'd be looking mainly on BS, Profit and Cashflow.
In that case, are they doing badly?

IMO, our mind is being guided by Mr Market's manic depressive mood (being thinly traded magnified the impact).
If in alternative scenario whereby its share price has been up and up for the past few years, we'd be thinking it's a great investment, but the business numbers remain the same?

Their RORO business is largely operating like a 20-30 years bond.
To be exact, bond with step up interest, as the debts are being pared down over the years (reducing finance expense, adding to bottom line).
The long term visibility is there.

However with strong-minded (or you might say stubborn) Management "purging" out short term speculative opmi,
share price kept depressed for their "allies" (those opmi with interest aligned to them) to benefit upon.
If they want to hike the price, it's not difficult, considering the buyback controls most trading volumes?

<vested and definitely bias>

[¯|_(ツ)_/¯]

100% agree, and that's why this counter is where I stashed my spare cash. 

It was under radar and so far so good.

Now, with share buy-back, no much chance to buy below 25cents; with dividend cut by half, I felt the pinch too, but what to do?

I just hope that dividend could be re-instated bar.... otherwise, I don't mind a de-list offer. 

Gratitude.

[fallscushion]

This cashcow has net cash of about 35% of Market cap (at price S$0.25-0.26).
If I were the substantial shareholders, I'd definitely be darn tempted to give a lowball offer.
I bet S$0.28-0.29 might even be enough to get the long duration "enduring" shareholders to bow out.
Worst case, I up the offer to S$0.3?
Since dividend is so low, cash abundance and no new ships coming soon (presumably, as the interest rate is high), why not?

[ksir]

Aiyooo Boss also coming to compete with my idled cash deposit of this 4% interest piggy bank:
https://links.sgx.com/1.0.0/corporate-an...0fad30db6d
https://links.sgx.com/1.0.0/corporate-an...d962f2ad7a

Before you say the quantity of his purchase is peanut, look at the trading volumes first haha, oh but of course a matter of what price you pay right? Looking at their conservation (cheapo) buyback, you'd know the answer to that question also.
Anyway don't give me too low ball too soon. Need to find another piggy bank

[weijian]

Well, 4% deposit yield is clear for all to see. But whether is this structured deposit risk free or not, that is more qualitative in nature I suppose.

A little while back, VB CY09 mentioned on the 4% "structured deposit" from ShengSiong Group via selling put options, coupled with a free call option. Another wise old VB ghchua mentioned that 4% probably wasn't good enough. I tend to agree with both! After all, SSG was just yielding <2% before covid, before it had a big jump in same store sales by covid. Was 2% more tempting then? Or 4% more tempting now? Yield-wise, 4% is surely more tempting! But principal-wise, 2% is more tempting!

For Ow's SSC structured deposit to be consistently giving 4% regardless of risk free rate, or in other words <100bp against risk free stuff (eg. SSB or treasuries), I reckon OPMIs have given "AAAA" credit rating to Ow! After all, Ow's 4% structured deposit doesn't come with any complicated call/put options.

[ksir]

I tend to again agree on what Duan YongPing super short conclusion on Buffett's investment style (YMMV):
不懂不做

And when you combine it which in a glance to see if this is a fat fish or not, it should be quite obvious that 4% is a super conservative "interest" on this deposit.

This deposit has 50% in net cash and throwing 15-20% (let's put it 10%) of returns yearly, whereby only 4% returned as dividend with 0-1% returned in buyback.

The 100M question is do you see through (懂) the business enough to invest in (做) ?
If the answer is NO, none of investment should make sense to u.

[weijian]

This deposit has 50% in net cash and throwing 15-20% (let's put it 10%) of returns yearly, whereby only 4% returned as dividend with 0-1% returned in buyback.

This fish is definitely fat, since it retained so much fat. But I wonder who holds the butcher knife?

I thought if the fish gets fatter, it may actually produce more eggs - At least, that is what I learned in Biology 101. But the no. of eggs look to be remarkably consistent through out the decade. Maybe these are "AAAA" eggs after all, for its consistency fortunately or unfortunately  YMMV

[ksir]

yah in this case, surely a lot if not most folks assigned "value trap" label to this fat, thinking the share price gone no where in past 10 years (maybe even negative).
But so what, why are we determined by Mr Market.
I think in our investment we are trying to determine what will happen (assess the fat fish) and can't control when it will happen (when the fat fish will be butchered?? haha).
But so what, if there is no Mr Market price and this thing keep giving me 4% dividend + some buybacks and sooner or later it will give me more or 1 time special dividend (when, don't know, can't control, assumption is either that or lowball offer, but so what, that is what the MOS for, no?)

[weijian]

It is definitely possible for something "special" to happen. After all, something special did happen ~17years ago. Then, Chairman Ow was in his element - selling all of SSC's non-PCTC vessels in the peak of the cycle and then giving out special dividends. SSC was left with ~3 vessels.

For the past 17years, net of pre-owned purchases, scraps and new build, SSC currently has 5 PCTC as of end FY23. Coincidentally, the last addition to the current fleet was a brand new PCTC in 2015. With a useful life of 30years, the profile of the 5 vessels are as follows - 9 years old - 1, 20years old - 2, 24years old - 1, 25years old - 1).

Unless technology has improved in the last 10years to extend useful lives OR insurance firms are willing to insure against >30yr old boat sinking 5000cars to the bottom of the ocean, else it is reasonable to assume that 40% of the fleet size will require some replenishment in the coming years. With all the ESG nonsense, could Chairman Ow be forced to abandon his preference for pre-owned (like a 5-10year old PCTC and then secure another 10+5year lease) and get a new built instead?

Extract from Chairman Ow's msg in AR23:
It is evident that there will be a radical shift to embrace Bio-LNG energy as a solution for the shipping industry’s decarbonisation efforts to reach the 2030 International Maritime Organization targets. Such an inevitable shift requires highly trained sea-going personnel and there is currently a dearth of such resources. Moreover, the capital expenditure will also increase greatly from US$70 million to US$110 million for a newly built LNG dual-fuel PCTC

With all the shipyards full, booking may have to be made earlier than later. So where is the capital cycle turning towards? On well, Mr Market cannot be right valuing Yangzijiang Shipbuilding at >2x P/B, while SSC is almost at 50% discount to book! Or maybe He could be right after all, predicting that SSC's fat will be distributed to outsiders.