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Mercator Lines

Both buying and selling queues are pretty large. Battle of the bulls and bear!

Nope. I am just a uni student who is investing in his NS savings!

Positive catalyst for the company - Commencement of US$109mil 5 year contract with Zhuhai Steel.

sureesh40 ( Date: 23-Dec-2009 13:42) Posted:

Yes I understand, but do you work for Mercator

grandmaster89 ( Date: 23-Dec-2009 12:36) Posted:

I am a shareholder hence part owner of the company. I see all of my investments as part ownership of the company albeit a very tiny one :(

Yes I understand, but do you work for Mercator

grandmaster89 ( Date: 23-Dec-2009 12:36) Posted:

I am a shareholder hence part owner of the company. I see all of my investments as part ownership of the company albeit a very tiny one :(

You use the word we will welcome our third post panamax vessel. Are you working for mercator lines.

grandmaster89 ( Date: 22-Dec-2009 14:55) Posted:

Their revenues are quite predictable since most of it comes for long term Charters. Since they won the Cosco Contract, I expect it to add $$$ to its revenue in Q3. Moreover the second post-panamax vessel in currently under spot charter so it will add to the revenue as well. Next year, we will welcome our third post-panamax vessel, which will again add to the revenues.

Currently their 1H EPS is 2.3 cents so annualized EPS will be approx 4.6 cents (more than 50% down from last year). This means that the share price is trading at PE 6.4. Their NAV is 40 cents so it is trading at P/B ratio of 0.73 (lower than courage marine of STX PO).

Since they are generating positive operating cashflow and no longer have anymore capital expenditure for new vessels, I expect the cashflow will be diverted to debt repayments which will increase its NAV.

sureesh40 ( Date: 22-Dec-2009 10:10) Posted:

So if Q3 will have slight growth in revenue, then will it sustain into Q4 and so on.

I suppose it all depends on economic growth. BTW why did this stock fall from 40 cents to below 30 cents.

What is the current book value of the stock and PE ratio. Do you think it will fall to 25 cents

Coking Coal Shortage in China to Spur Demand Fight With Japan

Dec. 18 (Bloomberg) -- China, the world’s largest steelmaker, faces a shortage of coking coal that may drive imports next year and spur a fight for resources with Japanese and South Korean mills, two Chinese industry groups said.

“Domestic demand for coking coal will rise moderately next year, while global demand may gain faster, intensifying competition,” Wu Chenghou, senior adviser of the China Coal Transportation and Distribution Association, said in an interview.

China’s coking coal imports rose 12-fold this year, boosting sales of BHP Billiton Ltd. as the government closed smaller, unsafe mines. Prices may jump by between 23 percent and 38 percent in 2010, as global demand rebounds from the deepest recession since the 1930s, according to Macquarie Securities Group, JPMorgan Chase & Co. and Morgan Stanley.

“China doesn’t have enough domestic supply to meet increasing demand from its steelmakers,” said Zhang Bochun, secretary general of the Hebei Coking & Chemical Industry Association. Mills would “compete with foreign rivals,” he said in an interview.

Chinese imports in 2010 may be similar to this year, Zhang said. Hebei province buys the most coking coal in China, according to industry researcher Mysteel.com. The nation’s $586 billion stimulus spending is spurring automakers and property developers to buy more steel, leading Baoshan Iron & Steel Co. and Chinese mills to expand coal consumption to feed furnaces.

Intense Competition

Import demand by China, the world’s biggest coking coal buyer after Japan, may rise 5.6 percent to 38 million metric tons next year from an expected 36 million tons this year, Macquarie analysts led by Jim Lennon said in a Dec. 15 report. Domestic coal prices in the nation may increase 14 percent next year, Citigroup Inc. said in a Dec. 4 report.

Japan’s purchases may jump 14 percent to 58 million tons, and South Korea’s demand may rise 17 percent to 21 million tons next year, Macquarie said.

“BHP and other suppliers may add exports to Japan and South Korea because demand is picking up there,” said Zhang Weifang, a Shanghai-based analyst of Mysteel.com. “The Chinese would probably have to pay higher spot prices, compared to their foreign rivals who would pay lower contract prices.”

China would be demanding more high quality hard-coking coal in the future as it expands mills, BHP Billiton said in a September slide presentation. The nation this year “emerged” to fill a demand gap for coking coal, the world’s largest mining company said.

World’s Worst Mines

The Chinese government started closing small coal mines in 2008 to improve their safety records after 3,770 workers were killed in 2007, making the mines the world’s deadliest. China produced 705.1 million tons of coking coal last year, according to Beijing Antaike Information Development Co.

Congestion on railways is also boosting imports by steelmakers which have furnaces near ports, said Mysteel’s Zhang.

These mills may get 20,000 tons to 30,000 tons of coal monthly by railway, she said. A ship can carry 70,000 tons, and take just half a month from Australia to China, she said.

Benchmark contract prices may surge to $180 a ton from $129 a ton, Macquarie forecast. JPMorgan and Morgan Stanley expect prices to jump to $160 a ton.

Steel demand growth in China will outpace supply in 2010, Deutsche Bank AG said Dec. 11. Steel output may exceed 600 million tons next year, after reaching a record 570 million tons this year, the China Securities Journal reported Dec. 17, citing Ma Guoqiang, general manager of Baoshan Steel Co., the nation’s largest steelmaker.

Their revenues are quite predictable since most of it comes for long term Charters. Since they won the Cosco Contract, I expect it to add $$$ to its revenue in Q3. Moreover the second post-panamax vessel in currently under spot charter so it will add to the revenue as well. Next year, we will welcome our third post-panamax vessel, which will again add to the revenues.

Currently their 1H EPS is 2.3 cents so annualized EPS will be approx 4.6 cents (more than 50% down from last year). This means that the share price is trading at PE 6.4. Their NAV is 40 cents so it is trading at P/B ratio of 0.73 (lower than courage marine of STX PO).

Since they are generating positive operating cashflow and no longer have anymore capital expenditure for new vessels, I expect the cashflow will be diverted to debt repayments which will increase its NAV.

sureesh40 ( Date: 22-Dec-2009 10:10) Posted:

So if Q3 will have slight growth in revenue, then will it sustain into Q4 and so on.

I suppose it all depends on economic growth. BTW why did this stock fall from 40 cents to below 30 cents.

What is the current book value of the stock and PE ratio. Do you think it will fall to 25 cents

grandmaster89 ( Date: 21-Dec-2009 18:40) Posted:

I shall attempt to make a revenue forecast for 3Q.

Vale Contract (Prem Putil VLOC) -

Revenue for Q3 - US$3.73mil (based on US$209mil for a 14 year contract)

Tata Power (3-4 vessels) -

Revenue for Q3 - US$20mil (based on US$320mil for a 4 year contract with all 4 ships deployed)

Arcelor Mittal (Garima Prem) -

Revenue for Q3 - US$5.4mil (based on US$60k/day rate)

North China Shipping (Gaurav Prem)

Revenue for Q3 - US$1.35mil (expires in Nov 09)

Cosco Group (Chaitali Prem)

Revenue for Q3 - US$3.56mil (based on US$39.5k/day)

European Charter (Garv Prem)

Revenue for Q3 - US$1.37mil (based on US$15.19k/day)

Total Revenue from Long term COA = US$35.4mil

Long term COA for 1H 10 is US$52.17mil (Q1 - 23.8mil, Q2 - 28.4mil )

My estimated value might be slightly lower though. The increase in estimated Q3 revenue is due to the Cosco Contract which started in Sept 09. I also estimated 4 vessels to be used for the Tata Power contract since Mercator received a new post-panamax.

Spot Charter for Q1 - US$11.7mil
Spot Charter for Q2 - US$6.63mil (only 3 free vessels for spot charter)
Spot Charter for Q3 - Estimated revenue US$10mil based on 5 free vessels

I expect a slight growth in revenue for Q3 by around US$3-5mil.

So if Q3 will have slight growth in revenue, then will it sustain into Q4 and so on.

I suppose it all depends on economic growth. BTW why did this stock fall from 40 cents to below 30 cents.

What is the current book value of the stock and PE ratio. Do you think it will fall to 25 cents

grandmaster89 ( Date: 21-Dec-2009 18:40) Posted:

I shall attempt to make a revenue forecast for 3Q.

Vale Contract (Prem Putil VLOC) -

Revenue for Q3 - US$3.73mil (based on US$209mil for a 14 year contract)

Tata Power (3-4 vessels) -

Revenue for Q3 - US$20mil (based on US$320mil for a 4 year contract with all 4 ships deployed)

Arcelor Mittal (Garima Prem) -

Revenue for Q3 - US$5.4mil (based on US$60k/day rate)

North China Shipping (Gaurav Prem)

Revenue for Q3 - US$1.35mil (expires in Nov 09)

Cosco Group (Chaitali Prem)

Revenue for Q3 - US$3.56mil (based on US$39.5k/day)

European Charter (Garv Prem)

Revenue for Q3 - US$1.37mil (based on US$15.19k/day)

Total Revenue from Long term COA = US$35.4mil

Long term COA for 1H 10 is US$52.17mil (Q1 - 23.8mil, Q2 - 28.4mil )

My estimated value might be slightly lower though. The increase in estimated Q3 revenue is due to the Cosco Contract which started in Sept 09. I also estimated 4 vessels to be used for the Tata Power contract since Mercator received a new post-panamax.

Spot Charter for Q1 - US$11.7mil
Spot Charter for Q2 - US$6.63mil (only 3 free vessels for spot charter)
Spot Charter for Q3 - Estimated revenue US$10mil based on 5 free vessels

I expect a slight growth in revenue for Q3 by around US$3-5mil.

Cosco - Ship Building and Repair

Mercator - Dry Bulk Shipping (transport iron ore and coal)

I think Cosco will be affected in 2011 onwards since there is just too much ships in the world. I don't think it has refilled its order book this year with new contracts. It might suffer once its current order books are done.

alvios ( Date: 21-Dec-2009 13:54) Posted:

Hi guys,

If i have the intention of putting money in for about 1-2yrs in the stocks, which will be a better option?

Mercator or Cosco?

Is there a high possibility of closing down for any of them?

any views to offer?

72% of the stock is owned by its parent, Mercator Lines Ltd (the second largest shipping company in India). It has the backing of a very strong parent.

I don't care about whether BB is buying in or not. A true value play will have no BB moving in initially. When they come in, its valuation will shoot up (eg Noble Group amazing run this year). Shipping companies are turn-around plays. If you believe in its recovery, you will make good profit.

I am less bullish on container shipping due to a possible permanent drop in demand of goods from debt hit America. Countries like China and India will turn towards its domestic industry to supply its own consumption in the future which negates the need for container shipping. But they will need raw materials since they lack it hence bulk shipping will still be needed no matter what.

sureesh40 ( Date: 21-Dec-2009 14:51) Posted:

why do you think so. if BBs are not buying into it in the future what propects does it have

tanh2l ( Date: 21-Dec-2009 14:31) Posted:

mls definitely a better invest for long ter

at this pt of time, we do not know when is the next target for BB. However base on current conditions and economic fundamentals of mls and biz chain model, its in gd strategic position for further upside

sureesh40 ( Date: 21-Dec-2009 14:51) Posted:

why do you think so. if BBs are not buying into it in the future what propects does it have

tanh2l ( Date: 21-Dec-2009 14:31) Posted:

mls definitely a better invest for long ter

why do you think so. if BBs are not buying into it in the future what propects does it have

tanh2l ( Date: 21-Dec-2009 14:31) Posted:

mls definitely a better invest for long term

alvios ( Date: 21-Dec-2009 13:54) Posted:

Hi guys,

If i have the intention of putting money in for about 1-2yrs in the stocks, which will be a better option?

Mercator or Cosco?

Is there a high possibility of closing down for any of them?

any views to offer?

mls definitely a better invest for long term

alvios ( Date: 21-Dec-2009 13:54) Posted:

Hi guys,

If i have the intention of putting money in for about 1-2yrs in the stocks, which will be a better option?

Mercator or Cosco?

Is there a high possibility of closing down for any of them?

any views to offer?

You are right. It is involved in dry bulk shipping also though their fleet is half the size of Mercator's. The problem is that it only accounts for 7% of Cosco Revenues according to their Financial Highlights.

des_khor ( Date: 21-Dec-2009 12:11) Posted:

I thought Cosco involve both?

Cosco build ships while NOL is into container shipping and Mercator is in bulk commodity shipping. They are in different industries. Depends which you are bullish about :)

des_khor ( Date: 21-Dec-2009 12:06) Posted:

Becareful of MFT... thier words can't be trusted at all.. how can lost almost sgd1B still can target at 2.20?? Cosco better bet...

Jackpot2010 ( Date: 21-Dec-2009 10:12) Posted:

MLS - lack of coverage by int'l brokerage. Compare to NOL, Goldman Sachs target price = $2.20.

Current status of Mercator's ships.

Chaitali Prem is one of Mercator's new post-panamax vessel chartered in Sept 09. It is deployed to Refined Success a subsidiary of Cosco Group as part of a 3 year contract with a daily rate of US$39,500. It is now off the coast of South Africa. Its plying the Brazil - China iron ore route

http://aprs.fi/?call=247274800

Chanchal Prem is one of Mercator's new post-panamax vessel chartered in Oct 09. It is off the coast of Brazil. I presume its plying the Brazil - China iron ore route

http://aprs.fi/?call=538003661

Garima Prem is a gearless panamax owned by MLS. Currently contracted to Arcelor Mittal Group till Aug 2010 at US$60k/day. It is currently in USA near Virginia.

http://aprs.fi/?call=565554000&mt=m&z=2&timerange=3600

Garv Prem is an owned gearless Panamax. It is close to Singapore with a voyage destination to India. I am assuming that it is plying the Australia/Indonesia - India coal route.

http://www.marinetraffic.com/ais/default.aspx?oldmmsi=565513000&zoom=10&olddate=12/2/2009%202:40:07%20AM

Prem Veena is an owned Gearless Kamsarmax. It departed from Australia recently. Seems to be heading towards China. Could be plying the China - Australia coal route.

http://www.marinetraffic.com/ais/default.aspx?oldmmsi=565500000&zoom=10&olddate=11/30/2009%204:14:23%20PM

Prem Aparna is an owned geared Panamax. Currently off the coast of Russia in the Black Sea. Was travelling there from Turkey. Not too sure which route its playing. Could be on spot charter for one of the supply chain manager firms.

http://aprs.fi/?call=565272000

Prem Vidya is an owned geared Kamsarmax. Its now in Singapore. It was in China 2 weeks ago.

http://www.marinetraffic.com/ais/default.aspx?oldmmsi=565514000&zoom=10&olddate=12/20/2009%2012:06:44%20PM

Prem Varsha is an owned Geared Kamsarmax. It is now in the Gulf of Mexico near New Orleans

http://aprs.fi/?call=565353000

Gaurav Prem is an owned gearless panamax. It is near India.

http://www.marinetraffic.com/ais/default.aspx?oldmmsi=565501000&zoom=10&olddate=12/20/2009%202:05:16%20PM

Kesari Prem is an owned geared panamax. It is off the coast of Malaysia and it is heading towards an Indian port.

http://www.marinetraffic.com/ais/default.aspx?oldmmsi=565934000&zoom=10&olddate=12/19/2009%2012:15:34%20AM

Kanak Prem is a geared panamax. Not too much info. Left Singapore earlier this month.

http://www.marinetraffic.com/ais/default.aspx?oldmmsi=565933000&zoom=10&olddate=12/4/2009%203:28:09%20PM

Kalpana Prem is an owned geared panamax. It is heading towards the Suez.

http://www.marinetraffic.com/ais/default.aspx?oldmmsi=564094000&zoom=10&olddate=12/11/2009%207:12:56%20AM

Prem Putil is an owned VLOC. It is deployed to Vale for a 14 year contract to transport iron ore from Brazil to China. Its close to Madagascar heading towards Brazil.

http://www.marinetraffic.com/ais/default.aspx?oldmmsi=370605000&zoom=10&olddate=12/18/2009%2011:29:45%20PM

Becareful of MFT... thier words can't be trusted at all.. how can lost almost sgd1B still can target at 2.20?? Cosco better bet...

Jackpot2010 ( Date: 21-Dec-2009 10:12) Posted:

MLS - lack of coverage by int'l brokerage. Compare to NOL, Goldman Sachs target price = $2.20.

sureesh40 ( Date: 21-Dec-2009 09:41) Posted:

With all the good plans for the company's future why isn't the stock price going up.

it's all time high was 77 cents. Any chance when the next super bull run comes within 5 years, this stock price will go up to $1. Or do you have to keep it really long in order to for the stock price to grow. There are very few shipping stocks to choose from.

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Mercator Lines