Author Topic: SSW - Seaspan  (Read 141348 times)

mranski

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Re: Seaspan Begins The Year With Promise
« Reply #20 on: March 18, 2010, 09:46:58 AM »
Thanks. What I was asking is why you analyze the value of this stock using cash flow instead and net income and p/e ratio. I've been in a number of trusts where cash flow and distributable cash seems very good but the net income isn't there and they eventually had to reduce distributions. To me this is a $10 stock earning $1 per share so it's earnings yield is 10%, a pretty fair valuation, undervalued maybe but not by a huge amount.


Myth465

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Re: Seaspan Begins The Year With Promise
« Reply #21 on: March 18, 2010, 10:02:25 AM »
After looking at FUR and Other REITs I would be fine marking down CAPEX significantly. We have $10 and $2 in cashflow. Replacement capex at depreciation seems a bit high to me, given that these are 30 year assets which can be sold during peaks of the market and bought during downturns. The question is whats a good percentage of depreciation to use for the markdown. Maintenance is already built into the Cashflow number.

mranski

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Re: Seaspan Begins The Year With Promise
« Reply #22 on: March 18, 2010, 11:22:48 AM »
Correction, meant to type "cashflow instead OF net income and p/e ratio.

gaf63

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Re: Seaspan Begins The Year With Promise
« Reply #23 on: March 18, 2010, 12:16:46 PM »
The main reason to use cash flow, imo,  is because of SSW's use of interest rate swaps to cap interest at 6%.  These swaps are marked to market each qtr. and can add or subtract from normal earnings.  Plus this co. has historically paid out a high % of cf  in divs.  Once all funding for ships is taken care of , the div. will or at least I hope so be raised back up to the $1.90 level

gaf63

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Re: Seaspan Begins The Year With Promise
« Reply #24 on: March 18, 2010, 04:00:44 PM »
what I should have written was , back to the 1.90 level that less>iv mentioned above.
This idea was Less > iv and J east's around a yr. ago now, and both have written  posts on SSW, with
Less>iv posting extensive numerical analysis.  I want to  thank both of you.  For I think this will be at least a 3 bagger on my original investment, and am looking to invest more.  
   The problem I had a year ago  was not understanding the interest swaps, and the possibility of charters breaking their contracts.  Still dont really have a grip on the swaps but they made it through the last yr. w/o problems with the counterparties and banks.  As to contracts , close to the worse yr. ever for container co. and no one , at least yet , has broken their contracts.  CSAV restructured and asked for a redo , but SSW said no and the contracts are intact.  HL also asked but were told no, and  for now the contracts are intact.   CSAV  at moment only has 2 ships on charter, with 2 more to be delivered which could be a problem but a small one.  So , this gives me confidence that the charter contracts are solid and  will remain in place for their time period.
    CEO Wang stated in the CC that there are 10 more ships to be delivered this yr. , and that some charter parties have asked for move ups to their delivery dates. So it appears with container prices improving the lines are thru the worst of the crisis and are ready to take their ships.  The over supply issue of idle ships is still there but slow steaming, scrapping and improved demand for containers is lessening its effect.  So I believe SSW is through the worst , and will start delivering their ships , increasing their cash flow and dividend.  As to numbers, even if they dilute up to 115 mil shares, and pay out 75% of cad(when all ships are delivered),  the div. should range from 1.70 to 1.95.  W/O dilution, much much better,
GAF

JEast

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Re: Seaspan Begins The Year With Promise
« Reply #25 on: March 19, 2010, 08:39:22 AM »
gaf63,

Glad to have helped. To paraphrase Buffet, there are times when you should use a bucket and not a thimble. Though I was bullish 15+ months ago, I just used 'two' thimbles instead of the bucket. Irrespective of this fact, Seaspan is not super cheap presently, but still has a reasonable margin of safety and the future is starting to clear. In addition, the big cash flow is starting as the big ships are being delivered this year.

There are other more cheaply priced companies in the market that should bring more capital appreciation potential, but none are as solid or have the balance sheet and relationships, which I am of the belief that Seaspan has (i.e. top of the quality chain). When the distributions start to increase in the not too distant future, the Mutual Fund folks should return to the industry and Seaspan should shine. This still appears to be an excellent candidate for tax-deferred accounts and I have been in the market today buying for both tax-deferred and capital appreciation accounts.


Cheers
JEast

lessthaniv

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Re: Seaspan Begins The Year With Promise
« Reply #26 on: March 19, 2010, 09:11:18 AM »
Thanks. What I was asking is why you analyze the value of this stock using cash flow instead and net income and p/e ratio. I've been in a number of trusts where cash flow and distributable cash seems very good but the net income isn't there and they eventually had to reduce distributions. To me this is a $10 stock earning $1 per share so it's earnings yield is 10%, a pretty fair valuation, undervalued maybe but not by a huge amount.


mranksi,

it's pretty standard to analyze cash flows, especially free cash flows, in lieu of net earnings. there are lot's of reasons to do this. net earnings do not include allocations for capex and are easily manipulated by accounting conventions. in seaspans case, they use swaps to fix up their variable rate debt (for which they don't use hedge accounting) and consequently it creates significant swings in net earnings depending which way interest rates are moving. so, their net earnings are not a good proxy for the true cash flows within the business. if you then apply a p/e to an "e" that is skewed, your valuation becomes meaningless. a p/e is more useful as a relative valuation tool.  two companies in the same industry with similar accounting techniques could be compared using p/e's to assist in determing relative valuations.

this is why the company presents us with "distributable cash". they begin with the net earnings number as reported but adjust it for non-cash items etc... to give us a clearer picture of the true cash flows and operating performance of the business. cash flow is the bloodline of the business.

hope that helps a bit.
<IV

mranski

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Re: Seaspan Begins The Year With Promise
« Reply #27 on: March 19, 2010, 09:49:42 AM »
thanks for the detail.  I'm used to analyzing using p/e for the most part on the stocks i look at. Depends on the business model i think.


lessthaniv

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Re: Seaspan Begins The Year With Promise
« Reply #28 on: March 19, 2010, 09:54:52 AM »
thanks for the detail.  I'm used to analyzing using p/e for the most part on the stocks i look at. Depends on the business model i think.



Mranski,

if you are interested, PM me and I'll send you my old CFA books on equity valuation which will help you out a lot. I'll even pay for the shipping if it's reasonable.

 ;D
<IV

Myth465

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Re: Seaspan Begins The Year With Promise
« Reply #29 on: March 19, 2010, 09:59:46 AM »
Here are some good podcasts - 1 or 2 talks about why to use Free Cash Flow instead of Earnings. Have a listen they are pretty short and to the point.

http://www.gurufocus.com/news.php?author=Geoff+Gannon