Seeking Alpha: Ship Finance Needs To Skillfully Redeploy Capital

I continue to believe that the management team at Ship Finance (NYSE:SFL) is high quality and savvy, but they do not have the luxury of standing pat with the hand they're playing. The cash sweeps from the company's renegotiated charter agreements with Frontline (NYSE:FRO) have chipped in solid cash flow and give the company exposure to higher tanker rates in 2015, but those sweeps end after this year and front-loaded drilling contracts will reduce the cash to be reaped from the drilling rig assets.

On a positive note, the company has over $200 million that it can deploy into the vessel market and the company's comparative "platform neutrality" means that management can look for value in tankers, containerships, dry bulk, or drilling rigs as the market dynamics dictate. What's more, the shipping industry is still seeing a lack of high-quality (and affordable) capital, which should work in the company's favor.

Today's valuation is arguably fair if you do not believe that Ship Finance's management can successfully redeploy that capital into vessels/charters that will earn an attractive risk-adjusted return. Historically that has not been a good bet to make and while I can appreciate the appeal of other ideas in shipping like Euronav (NYSE:EURN) and Costamare (NYSE:CMRE), I think Ship Finance is undervalued and offers an attractive yield for those investors who prefer to generate their returns from dividends versus capital appreciation.

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Ship Finance Needs To Skillfully Redeploy Capital

Investopedia: Big Clients And Long Charters Keeping Seaspan Afloat

Within the generally rotten shipping industry, containership companies have looked a little stronger than average. That isn't because the operating conditions are great (they're not), but because many of these companies operate with long-term charters and large customers that can weather the ups and downs of the business. While all of that means that Seaspan (NYSE:SSW) will very likely survive this trough in the market (and probably do better than just survive), it doesn't necessarily make for the most dynamic pick in the investor's universe.

Read more here:
http://stocks.investopedia.com/stock-analysis/2012/Big-Clients-And-Long-Charters-Keeping-Seaspan-Afloat-SSW-CMRE-DAC-TAL0522.aspx

Investopedia: Ship Finance Has The Hatches Battened Down

Shipping is still a mess. Tanker rates have picked up a little bit and dry bulk rates seem to have at least leveled off, but overall rates are still not very good. That presents a fairly uninspiring backdrop for Ship Finance (NYSE:SFL), one of the world's largest tanker fleet owners. Although Ship Finance seems built to last, investors may wonder if the risk of further worsening conditions and/or a dividend cut is worth the potential of a sector recovery and the above-average dividend yield.


Restructured Deal with Frontline was a Must
Ship Finance does not operate the ships it owns, instead it charters them out to operators on long-term contracts. Unfortunately, a very large percentage of the firm's ships (and nearly all of its oil tankers) are chartered to Frontline (NYSE:FRO), the recently-struggling shipping firm controlled by John Fredriksen. For related reading, see Play the Bottom in Shipping.


Read the full piece here:
http://stocks.investopedia.com/stock-analysis/2012/Ship-Finance-Has-The-Hatches-Battened-Down-SFL-FRO-SDRL-CMRE-TEU0316.aspx

Investopedia: Frontline Lives On, But At What Cost?

There was no question that the company had to do something, but Frontline (NYSE:FRO) has taken a pretty interesting path in its restructuring. Although the chances of Frontline going out of business due to liquidity pressures are now much lower, it is an open question as to how upside remains left with the publicly-traded remainder and who really benefits the most from this somewhat convoluted transaction. (For related reading, check out Understanding Financial Liquidity.)

 

From One to Two  

Frontline was founded in the mid-1980s by John Fredriksen in response to a terrible market for oil tankers. Yet another terrible tanker market, a market wherein rates have frequently been at or below cash operating costs, will now fundamentally change this company going forward.

To read the full article, please click this link:
http://stocks.investopedia.com/stock-analysis/2011/Frontline-Lives-On-But-At-What-Cost-FRO-SFL-NAT-DSX1207.aspx

Investopedia: DryShips Still Leaking

If this is what an economic recovery looks like, investors in the shipping sector should shudder to think what even worse times might look like. While DryShips (Nasdaq:DRYS) has fared better than several of its rivals in drybulk shipping, the stock has been punished as shipping rates continue to decline below the operating costs of even the best operators. Though this is not a sustainable set of circumstances, and Capesize rates have spiked up recently, it could be some time before the shipping industry looks truly healthy again.

Disappointing Results For Q2  
DryShips did not report an especially strong fiscal second quarter. Revenue was basically flat, as positive (albeit disappointing) growth of 16% in the offshore drilling segment was offset by a 19% decline in net voyage revenue in the drybulk business. Revenue in the drilling business was hurt by several rig mobilizations (companies typically do not get paid while they move rigs to a new jobsite); though that is a valid issue, it is one that the company could (and should) have communicated to investors earlier.

Read more through the link below:
http://stocks.investopedia.com/stock-analysis/2011/DryShips-Still-Leaking-DRYS-RIG-DSX-SB-NAT-GLNG-CMRE0902.aspx