SSW - Seaspan

[JEast]

Two points:  First, they must have some strong interest from the brokers to come back so soon after the earlier attempt, and second, I would not characterize the float as a total dilution as the capital will be adding strength and future returns to existing share owners as referenced in my earlier 10/10/13 comment.

Cheers
JEast

[Uccmal]

Two points:  First, they must have some strong interest from the brokers to come back so soon after the earlier attempt, and second, I would not characterize the float as a total dilution as the capital will be adding strength and future returns to existing share owners as referenced in my earlier 10/10/13 comment.

Cheers
JEast

Seems like it.  The stock is tightly held.  The volume yesterday was around 5 million, with 3.5 million shares hitting the market, and a bit of churn.  No argument regarding the dilution.  I was just noting that the stock went down more than the immediate dilution factor. 

[no_free_lunch]

Found this writeup/history on Seapan.  It is an investment thesis, written originally in 2006 and then updated over the past 7 years.   With the various updates you get a nice history of seaspan before, during and after the GFC.   Definitely worth a read.  Thanks to writser for posting the link.

http://www.valueinvestigator.com/en/valuefavourites/ssw.php

[Uccmal]

First quarter earnings were released this week. 

http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=843195

Nothing unusual.  In the conference call they explained the lower than usual dividend increase - only 10% - being due to building capital to pay for the big new builds. 

Still my largest common stock holding.  I would make it my entire portfolio if I could but that would be dumb.  5.5 years and holding.

[xtreeq]

The P3 Network is rejected by China
http://online.wsj.com/articles/shipping-alliance-blocked-by-china-1403001240

[Uccmal]

Big time sale for those who like big fat growing dividends. 

My guessing is it is selling off in sympathy with oil, and China even though the business is mostly immune to these effects. 

[xtreeq]

Mr. Market thinks that with low oil prices there's no more need for the fuel efficient Saver ships.
Still one of my largest holdings.

[Uccmal]

Mr. Market thinks that with low oil prices there's no more need for the fuel efficient Saver ships.
Still one of my largest holdings.

This completely baffles me.  There are years in most of these charters.  The price of oil is of no relevance to Seaspan over the next few years.  A slowdown in China is of no relevance.  A global recession is of no relevance at least for a few yrs. 

[yadayada]

so i got the share structure right, thing is roughly trading at 5-7x earnings of between the next few years? Why is it trading on chronic discount?

which shares are best to buy here? Im always at losss when there are preferred shares involved.

[Uccmal]

so i got the share structure right, thing is roughly trading at 5-7x earnings of between the next few years? Why is it trading on chronic discount?

which shares are best to buy here? Im always at losss when there are preferred shares involved.

You really need to look at the proxy statements to appreciate this business.  The Washington Family of Vancouver are the largest shareholders and the company founders.  Kyle Washington and Gerry Wang (CEO) went to school together in Canada.  Seaspan was originally started as an off shoot of Seaspan Marine Corp, a ship building company in BC, owned by the Washington Family.  During the liquidity crisis in early 2009 Seaspan was having trouble meeting its covenants and Kyle Washington injected 200 million to see them through.  So they have a very interested owner. 

It trades low because it is not well understood.  SSW is not a shipping company.  It is a leasing company.  It has more akin to Ge Capital's car leasing business, or AIGs former plane leasing business.  SSW leases container ships to an assortment of shipping companies on long term leases. 

50 % of their clientele is two Chinese shipping companies. This looks risky because its China, but it isn't really risky.  One of the Chinese companies tried to pay SSW less per ship during the recession but Gerry held firm. 

The other apparent risk is their debt.  On a consolidated basis it looks high but it is segmented per ship.  This is not well understood. 

The other apparent risk is the shipping spot rates.  These have been low for a few years.  Spot rates are of little relevance to Seaspan.  SSW doesn't work to the spot rates. 

Whether it gets recognized one day is totally beyond my ability to forecast, and not part of my thesis.  It pays a great dividend that it increases each year, so the stock will rise with the dividend increase.  I think the company may eventually trade higher as it matures.  When I first bought the stock they had less than 20 ships if I recall correctly.

As to the preferred or common.  The Cs are around 9% right now with no stock upside.  If interest rates rose significantly there might be capital loss.  The common is yielding over 7.5% on purchase price today with stock and dividend upside.  My money is on the common.  Obviously, more volatile.