Globus Martime, a Greek microcap shipping company, reported a loss for H1 due to impairment charges. Without the impairment charges, the company would have profited $0.13 per share. Revenue was roughly flat versus a year ago.
The company has shifted five of its seven ships to the spot market. Apparently, this is a strategic move to take advantage of the expected recovery in charter rates. The CEO George Karageorgiou said in the report that by next year, when rates are higher, the company will move the ships to longer term charters. The CEO appears to have a much more positive tone compared to last several years. He even said he intends to grow the fleet in the next few years.
The company reported a $1.7M impairment charge for H1. This impairment has been fluctuating recently because one of the company's ships is held for sale. And its value changes every quarter due to mark-to-market accounting. The impairment has even been negative in the past.
An investor in Globus Maritime must weight two issues. One is the charter rates, which one can gauge using the benchmark like the Baltic Dry Index (BDI). And the other is the company's debt. BDI right now is above the average of the last few years; see here. But it is still depressed, though the CEO is optimistic. The debt issue looms quite large. The company has $85M in debt and $60M of equity. The company's adjusted EBITDA is 5.5 times the interest expense. However, EBITDA doesn't include depreciation. With depreciation, then the interest coverage is an unacceptable number.
In other news, IEHC's CEO wrote a shareholder letter along with the 2014 annual proxy. In the letter, he summarized the published 2014 results. But more importantly, he stated that, at this point in Q2 FY2015, the company's order backlog is $8M. This is the highest level ever and a $2.1M increase since FY2014 end. The company is buying equipment to increase capacity to meet this demand. The stock jumped 12% to $5.10 per share on the news.
Showing posts with label GLBS. Show all posts
Showing posts with label GLBS. Show all posts
Tuesday, September 23, 2014
Tuesday, April 30, 2013
Why I Sold Globus Maritime
Globus Maritime (GLBS) reported Q4 earnings yesterday. And
it was quite a revelation to me. Their
operating loss was to be $2.8 mil.
However, they took a $80 mil write down of top of the small loss!
I bought this stock a year ago because its book value was more than 5x
its market cap. Now, with one stroke of a pen, it is less than 3x.
GLBS is a small shipping company. The company owns only 7 bulk ships. As with all shipping companies recently, the company's earnings were hit hard by the global glut of ships. The report says they expect the situation to persist until 2014. But the company has $10 mil of current assets. So cash flow is not a problem in the short term while management waits for the end of the shipping glut.
However, all this makes me realize that shipping is a hard, competitive business. Something that all veterans of the business know. While companies like GLBS are trying to wait out the downturn, others like Diana Shipping are using this opportunity to buy ships on the cheap.
For me, this is a lesson learned. GLBS may actually be cheap right now. I really don't know. But I know shipping investments are risky and they aren't for me, like airlines aren't for Buffett. And so, as a result, I have sold out my GLBS position, at a 10% loss.
GLBS is a small shipping company. The company owns only 7 bulk ships. As with all shipping companies recently, the company's earnings were hit hard by the global glut of ships. The report says they expect the situation to persist until 2014. But the company has $10 mil of current assets. So cash flow is not a problem in the short term while management waits for the end of the shipping glut.
However, all this makes me realize that shipping is a hard, competitive business. Something that all veterans of the business know. While companies like GLBS are trying to wait out the downturn, others like Diana Shipping are using this opportunity to buy ships on the cheap.
For me, this is a lesson learned. GLBS may actually be cheap right now. I really don't know. But I know shipping investments are risky and they aren't for me, like airlines aren't for Buffett. And so, as a result, I have sold out my GLBS position, at a 10% loss.
Saturday, December 8, 2012
GLBS Quarterly Update
Globus Maritime (GLBS) is a microcap shipping company headquartered in
Greece. The company trades on NASDAQ. The company reported a loss
of $0.8M for the 3rd quarter ended Sept 30.
I bought GLBS four months ago as an experiement in self-reliant small cap investing. I looked for cheaply valued small cap stocks. For the most part small caps - which I define as less than 1 billion in market cap - have no analyst coverage and very little news coverage. I used some screeners, mostly from Morningstar to get a list of candidates. Then I whittled my list down to 2 stocks: McRae Industries and GLBS. I don't regret my decision on those two given what I knew at the time. Ostensibly, McRae is doing decent while GLBS is down a hefty 33%.
Clearly, GLBS is down 33% because of two consecutive losing quarters. The two quarters' losses were small however, only a total of $3.2M of which about half was due to a previous year's receivable write-down. Compare that with 140M of equity. A long term investor should expect this kind of results in the highly volatile shipping business. The Baltic Dry Index is now hovering at 1000, which is a big drop from a high of more than 10,000 just before the financial crises of 2008.
Today, the world has gone a long way towards recovery from 2008, but the shipping sector is suffering from a from a glut of ships. Therefore GLBS management is hardly to blame for the weak results. As a part time investor working in an unfamiliar sector, I am the first to admit I don't know exactly why there is a glut of ships. But I believe it is at least in part due to unbridled spending just before the financial crises.
The glut effect caused the average daily rate per ship to be $10K for GLBS. Breakeven is around $12K. The GLBS presentation mentioned that the overbuild peaked in 2008 and is supposed to bring supply back to normal in the coming years. I really hate to rely on company supplied industry/market analysis but I make an exception now.
GLBS appears to be one of those companies that is honest and patient. Waiting for a weak moment to build up assets on the cheap. GLBS is extremely undervalued at a very depressed time for its industry. The critical question is whether GLBS is too good to pass up, or is the industry so hopeless that no company in the industry is worth it. Each GLBS share has about $13 of equity but the last close was $1.86 and its recent low was $1.63! At the current price I will hold off on buying more shares until the next quarterly. But if it falls down to around $15 I will seriously considering increasing my current position by 50%.
You can go here to see all my sources for this article. Any thoughts? Please comment!
I bought GLBS four months ago as an experiement in self-reliant small cap investing. I looked for cheaply valued small cap stocks. For the most part small caps - which I define as less than 1 billion in market cap - have no analyst coverage and very little news coverage. I used some screeners, mostly from Morningstar to get a list of candidates. Then I whittled my list down to 2 stocks: McRae Industries and GLBS. I don't regret my decision on those two given what I knew at the time. Ostensibly, McRae is doing decent while GLBS is down a hefty 33%.
Clearly, GLBS is down 33% because of two consecutive losing quarters. The two quarters' losses were small however, only a total of $3.2M of which about half was due to a previous year's receivable write-down. Compare that with 140M of equity. A long term investor should expect this kind of results in the highly volatile shipping business. The Baltic Dry Index is now hovering at 1000, which is a big drop from a high of more than 10,000 just before the financial crises of 2008.
Today, the world has gone a long way towards recovery from 2008, but the shipping sector is suffering from a from a glut of ships. Therefore GLBS management is hardly to blame for the weak results. As a part time investor working in an unfamiliar sector, I am the first to admit I don't know exactly why there is a glut of ships. But I believe it is at least in part due to unbridled spending just before the financial crises.
The glut effect caused the average daily rate per ship to be $10K for GLBS. Breakeven is around $12K. The GLBS presentation mentioned that the overbuild peaked in 2008 and is supposed to bring supply back to normal in the coming years. I really hate to rely on company supplied industry/market analysis but I make an exception now.
GLBS appears to be one of those companies that is honest and patient. Waiting for a weak moment to build up assets on the cheap. GLBS is extremely undervalued at a very depressed time for its industry. The critical question is whether GLBS is too good to pass up, or is the industry so hopeless that no company in the industry is worth it. Each GLBS share has about $13 of equity but the last close was $1.86 and its recent low was $1.63! At the current price I will hold off on buying more shares until the next quarterly. But if it falls down to around $15 I will seriously considering increasing my current position by 50%.
You can go here to see all my sources for this article. Any thoughts? Please comment!
Wednesday, September 5, 2012
Why I Own GLBS
In my August "Why I Own SEB" post I mentioned Warren Buffett's claim of riches in small caps. Last week, I decided to test his claim by opening a new position in Globus Maritime (GLBS). GLBS is actually a microcap
shipping company.
As I will explain, I feel GLBS is very undervalued and I hope
to double or triple my money in a few years.
I bought GLBS as a long term value investment.
Having said this, I want to warn the reader that microcap stocks
often have limited coverage in the media and can be subject to fraud
and/or manipulation. We all should be extra vigilant when dabbling
in microcaps. Furthermore, the information in this blog should
never be the basis anyone's investments.
The reader should do his own research and/or consult a professional for
investment advice before buying GLBS.
GLBS is a operator and owner of large dry bulk ships. GLBS started operation in 2006. It is tiny company with a market cap of $26M right now, and they own 7 ships. Their offices are in Greece but their ships are registered in other countries and they trade on NASDAQ. I found GLBS while doing using a screener for small-cap low P/E and high book value companies. In my screener, apparently more than half of the qualifiers are Chinese companies. I dismissed them because I perceive a lack of transparency and rule of law in mainland China. Then I saw GLBS. And the more I looked at GLBS the more I liked it. The first thing I notice about GLBS is the fantastic valuation metrics:
My next thought is what's the catch? I looked at most of their past financials -- which is easy considering they existed only 6 years. They were founded in 2006 with $40M seed money. They went IPO in what is called the Alternative Investment Market (AIM) in London in 2007. The IPO raised $50M which they used to purchase ships. Then they moved to the NASDAQ in 2010, without raising new cash. I don't know why they moved from London to USA but right now I am not too concerned by that fact. The have always maintained a fleet of around 7 ships. The following shows the earnings and some other key financial figures. All numbers are in millions USD.
The numbers show good earnings performance in a challenging economic environment. They have grown their equity. And they have paid dividends.
A peculiar reason I like GLBS is the fact that its office is in Greece. Being in Greece would certainly depress the stock price, but it is actually immaterial to the company operations. GLBS has customers are worldwide. So this is a mispricing by the market where I can take advantage.
Another reason I like GLBS is that it is majority owned by the board chair George Feidakis. This means that the board is motivated to keep an eye out for any improprieties; the board chair has his skin in the game.
I also like the documentation on GLBS. For such a small company investors must rely on management to be transparent and forthright, and that is the case for GLBS. Their website show all their financials going back to when they formed. Their reports are all very direct and easy to understand. For example I read a clear one page summary explaining their losses for 2009. It was due to a $20M impairment writeoff as they lowered cash flows projections of two of their ships going into a recession.
The downside to GLBS is that it is in a pitiful industry. The industry currently has a glut of ships which are depressing rates. The Baltic Dry Index has been at the lows of the 2008-2009 recession. I worry if GLBS can stay profitable this year. So far in the quarter ending in March, they earned $1.7M, which is actually on track for a good year. If the rest of the year deteriorates to breakeven I would still be satisfied. But if they have a loss I would have to revisit my decision to hold GLBS.
GLBS reports 2nd quarter earnings on Monday Sept 10. I'll be watching that closely. If there is any significant news I will post.
Disclosure: I just started buying GLBS last week and may continue to add to my position in the next few days.
GLBS is a operator and owner of large dry bulk ships. GLBS started operation in 2006. It is tiny company with a market cap of $26M right now, and they own 7 ships. Their offices are in Greece but their ships are registered in other countries and they trade on NASDAQ. I found GLBS while doing using a screener for small-cap low P/E and high book value companies. In my screener, apparently more than half of the qualifiers are Chinese companies. I dismissed them because I perceive a lack of transparency and rule of law in mainland China. Then I saw GLBS. And the more I looked at GLBS the more I liked it. The first thing I notice about GLBS is the fantastic valuation metrics:
- price to tangible book value: 0.20
- P/E: 4
- dividend yield: 13%
- dividend policy is to pay out at least 50% of net income.
My next thought is what's the catch? I looked at most of their past financials -- which is easy considering they existed only 6 years. They were founded in 2006 with $40M seed money. They went IPO in what is called the Alternative Investment Market (AIM) in London in 2007. The IPO raised $50M which they used to purchase ships. Then they moved to the NASDAQ in 2010, without raising new cash. I don't know why they moved from London to USA but right now I am not too concerned by that fact. The have always maintained a fleet of around 7 ships. The following shows the earnings and some other key financial figures. All numbers are in millions USD.
| 2011 | 2010 | 2009 | 2008 | 2007 | |
|---|---|---|---|---|---|
| Income | 6.9 | 6.0 | -10.1 | 42.8 | 12.0 |
| Assets | 256 | 218 | 188 | 284 | 286 |
| Liabilities | 116 | 100 | 65 | 163 | 189 |
| Equity | 140 | 118 | 113 | 122 | 97 |
The numbers show good earnings performance in a challenging economic environment. They have grown their equity. And they have paid dividends.
A peculiar reason I like GLBS is the fact that its office is in Greece. Being in Greece would certainly depress the stock price, but it is actually immaterial to the company operations. GLBS has customers are worldwide. So this is a mispricing by the market where I can take advantage.
Another reason I like GLBS is that it is majority owned by the board chair George Feidakis. This means that the board is motivated to keep an eye out for any improprieties; the board chair has his skin in the game.
I also like the documentation on GLBS. For such a small company investors must rely on management to be transparent and forthright, and that is the case for GLBS. Their website show all their financials going back to when they formed. Their reports are all very direct and easy to understand. For example I read a clear one page summary explaining their losses for 2009. It was due to a $20M impairment writeoff as they lowered cash flows projections of two of their ships going into a recession.
The downside to GLBS is that it is in a pitiful industry. The industry currently has a glut of ships which are depressing rates. The Baltic Dry Index has been at the lows of the 2008-2009 recession. I worry if GLBS can stay profitable this year. So far in the quarter ending in March, they earned $1.7M, which is actually on track for a good year. If the rest of the year deteriorates to breakeven I would still be satisfied. But if they have a loss I would have to revisit my decision to hold GLBS.
GLBS reports 2nd quarter earnings on Monday Sept 10. I'll be watching that closely. If there is any significant news I will post.
Disclosure: I just started buying GLBS last week and may continue to add to my position in the next few days.
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