Mercator Lines

Re: Mercator Lines

Postby grandmaster89 » Mon Dec 07, 2009 7:16 pm

winston wrote:Hi grandmaster89,

I was thinking of some of the risks on this counter:-
1) decline in spot rates
2) renewal of long term contracts at rates lower than the previous rates
3) long term rates locked in at very low rates
4) new supply of ships
5) China and India importing less commodities

What do you see as some of the risks associated with this counter ?

Take care,
Winston


Throw in the possible increase in fuel price and you would have listed all the possible risks associated with this investment.

1) 30% of MLS revenue is derived from spot rates. I believe this will have a negative impact on the revenue and profitability of MLS if BDI comes into downward pressure.

2) We haven't see any renewal of contracts yet. All eyes are on Mittal contract which expire in Aug 10.

3) There are 2 contracts negoitated this year - Cosco and Vale. Cosco contract will yield around 14.2K/day gross profits (39.5 - 25.3) which is equivalent to 5 mil a year. Mercator has a 14 year contract with Vale to use the VLOC and transport iron ore to China at 209mil approx = 14.92mil annual revenue. Both rates are not entirely unreasonable at the current economic climate.

4) This is a macro economic risk. Substantial number of ships has been delayed/cancelled/scrapped this year. As a result, only 40% of the outstanding 2009 order book has been delivered this year. Despite this, the average fleet growth will be around 6% this year. However the BDI has already priced this growth in.

5) This is a massive risk. This boils down to - Do you believe in the Indian and Chinese growth story? If yes, then commodities import will rise tremendously over the next decade.

I have a question though - Any clue whether the contract with Zuhai Yufeng steel will carry on? Mercator used the VLOC, originally scheduled for it, to charter Vale's contract. The contract with Zhuhai Yufeng
steel, for which this VLOC was initially scheduled, is proposed to be executed through another vessel to be chartered- in. Its been half a year since then, will Mercator charter another VLOC?
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Re: Mercator Lines

Postby winston » Mon Dec 07, 2009 7:23 pm

Hi grandmaster89,

Thanks for the kind analysis. I can see that you have already thought about the various risks as well.

Yes, fuel prices would also be a big risk.

Sorry, cant help you with the Zuhai Yufeng steel question.

Take care,
Winston
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Mercator Lines

Postby grandmaster89 » Mon Dec 07, 2009 9:26 pm

winston wrote:Hi grandmaster89,

Thanks for the kind analysis. I can see that you have already thought about the various risks as well.

Yes, fuel prices would also be a big risk.

Sorry, cant help you with the Zuhai Yufeng steel question.

Take care,
Winston


Hi Winston,

Thank you for your insightful comments. I have thought through all the possible risk and rewards for this investment. The risk-reward ratio looks favourable so I am entering haha!

Cheers,
GM89
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Re: Mercator Lines

Postby helios » Mon Dec 07, 2009 9:35 pm

GM89 looks like a brand name ... ...

:roll: :roll: :roll:
[Finance disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought regarding investing of any stocks/ funds and/or whatsoever. The author has no vested interest in the mentioned stock at the time of writing.
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Re: Mercator Lines

Postby grandmaster89 » Mon Dec 07, 2009 9:36 pm

San San wrote:GM89 looks like a brand name ... ...

:roll: :roll: :roll:


Not a bad idea if I become a businessman one day :)
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Re: Mercator Lines

Postby grandmaster89 » Sun Dec 13, 2009 7:49 pm

Please help me with this -

The article published early last year states that Mercator Singapore subsidiary is in the coal mining business. But Mercator Lines Singapore is not in the mining business....

You know Mercator Lines as a leading Indian shipping company but now they are reworking their business strategy and are focusing on coal mining in Mozambique.

Earlier this year Mercator Lines Singapore Limited, the company's overseas arm, was awarded a coal block in Mozambique but only now it is realised that it is actually a goldmine.

NDTV has learnt that the Mozambique block has an estimated reserve of 3 billion tonnes. Mercator owns 85 per cent economic interest in the Mozambique mine and it has a 30-year mining lease.

The company has agreed to pay $1 per tonne royalty to the Mozambique government and the mining will begin from 2010.

In Indonesia too Mercator has picked up 50 per cent stake in 2 coal blocks, which have a much smaller 15 million tonne coal reserve.

Mercator's Singapore arm, Mercator Lines Singapore Limited will be the vehicle for the company's coal mining foray.

Mozambique with its substantial coal reserves has been a preferred destination for Indian power and steel companies like Tata Steel, Tata Power, JSW and Reliance Power but now Mercator's coal find easily overshadows any other Indian company overseas.

So what will Mercator do with all the coal? Sources suggest it plans to tie up with a mining company and extract coal, which will then be shipped straight to India's west coast where power companies are desperate for imported coal for their plants.

Mercator already has a 5-year contract with Tata Power for providing shipping support and similar tie ups with Torrent, Reliance Power, Nagarjuna Power and MSEB. Now it is open to sell coal to all these power companies.

After NDTV Profit broke the story the Mercator management confirmed the development by issuing a statement saying: "As a backward integration process the company has forayed into coal mines and has acquired economic interests in 2 coal licenses in Indonesia and 1 license in Mozambique."

"A mining and the shipping combo makes sense as coal is essential for all the power companies," said Hemang Jani, Senior VP, Sharekhan.

Mercator is fast becoming an integrated supply chain
and logistics player. From coal mining to shipping, it will provide end to end services for the power plants and when all power players are looking at major expansions it is a win-win situation for all.
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Re: Mercator Lines

Postby grandmaster89 » Tue Dec 22, 2009 6:12 pm

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/defaul ... 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/defaul ... 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/defaul ... 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/defaul ... 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/defaul ... 15:34%20AM

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

http://www.marinetraffic.com/ais/defaul ... 28:09%20PM

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

http://www.marinetraffic.com/ais/defaul ... 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/defaul ... 29:45%20PM
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Re: Mercator Lines

Postby grandmaster89 » Tue Dec 22, 2009 6:13 pm

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.
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Re: Mercator Lines

Postby grandmaster89 » Wed Jan 06, 2010 5:39 pm

The Board of Directors of Mercator Lines (Singapore) Limited (the “Company”) wishes to announce that the Company will be releasing its unaudited financial results for the third quarter ended 31 December 2009 on Thursday, 21st January 2010. The results will also be available on the Company's website at www.mllsg.com
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Re: Mercator Lines

Postby grandmaster89 » Tue Jan 12, 2010 5:50 pm

The Board of Directors (the “Board”) of Mercator Lines (Singapore) Limited (the “Company”) wishes to
announce that-


The Company has entered into an agreement for the time charter-out (the “charter”) of its gearless Post Panamax vessel Chanchal Prem. The Charter shall be at time charter equivalent rate of USD 26, 500 per day for a period of 11 months to 13 months. The Charter will commence between April and May 2010. The Charterers are unrelated to the Directors and controlling shareholder of the Company. None of the
Directors and controlling shareholders of the Company has any interest, direct or indirect, in the Charter. The Charter is in the ordinary course of the Company's business.

For and on behalf of
Mercator Lines (Singapore) Limited
Shalabh Mittal
Managing Director & CEO
January 12, 2010


Things to take note of -

1) Chancal Prem is chartered in to Mercator at a daily rate of US$25.3K from Oct 09 - Oct 14.

2) The time charter of US$26.5K will cover the charter-in cost for the next year thereby preventing any operating loss.

3) This will help Mercator Lines reduce any potential losses until the BDI recovers.

The other post-panamax was chartered out to Cosco Group at a daily rate of US$39.5K in Sept 09 - Sept 12 thereby grossing at least US$14K/day of profits. The other post-panamax was delievered one month prior Chancal Prem and has the same daily chartered-in rate of US$25.3K.
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