Great Eastern Shipping Co. Ltd. · NSE:GESHIP
Great Eastern Shipping — The Great Eastern Shipping — Investor Presentation (August 2020)
22 slides from Great Eastern Shipping's investor presentation, Aug 19, 2020
Slide 1: Cover letter to BSE and NSE
Our Ref.: S/2020/JMT August 19, 2020 BSE Limited National Stock Exchange of India Limited 1st Floor, Phiroze Jeejeebhoy Towers, Exchange Plaza, 5th Floor, Plot No. C/1, Dalal Street, Bandra Kurla Complex, Bandra (East), MUMBAI – 400 001 Mumbai – 400 051 Dear Sir, We enclose copy of updated presentat
Slide 2: Investor Presentation – August 2020
INVESTOR PRESENTATION – AUGUST 2020 19 August 2020
Slide 3: Forward looking statements disclaimer
Except for historical information, the statements made in this presentation constitute forward looking statements. These include statements regarding the intent, belief or current expectations of GE Shipping and its management regarding the Company’s operations, strategic directions, prospects and f
Slide 4: Major Concerns Raised
3 MAJOR CONCERNS RAISED MTM Impact Too much cash on our balance sheet Offshore business 3
Slide 5: The Quarterly MTM Issue
THE QUARTERLY MTM ISSUE 4
Slide 6: Why Borrow in US Dollars
WHY BORROW IN US DOLLARS Almost all of our revenues are denominated in US Dollars, and our assets are denominated and traded in US Dollars Therefore, in order to avoid a mismatch between the currency of the assets and liabilities, we borrow in dollars rather than rupees These are normally loans from
Slide 7: Effective Structure of NCD & Currency Swap
EFFECTIVE STRUCTURE OF NCD & CURRENCY SWAP Sometimes, we get an opportunity to borrow in a more efficient way, which suits business requirements better This is through the issue of Non-Convertible Debentures in Rupees, which are later swapped into US Dollars, creating synthetic US Dollar debt. All o
Slide 8: Why the Derivatives MTM
WHY THE DERIVATIVES MTM While this may have a similar effective cost to US Dollar debt, it has some big advantages: • Non-amortizing, and so reduces pressure on cash flow in the short term • Therefore enables larger capital expenditure • In many cases, this is unsecured and so gives trading/age flex
Slide 9: Cash on Our Balance Sheet
CASH ON OUR BALANCE SHEET 8
Slide 10: Why Do We Need to Hold This Cash?
WHY DO WE NEED TO HOLD THIS CASH? Freedom to act – to Ability to act Risk Capital to deal make decisions swiftly when asset with market without lender prices are volatility pressure attractive 9
Slide 11: Volatility in Freight Spot Earnings
VOLATILITY IN FREIGHT SPOT EARNINGS $/day 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Suezmax Spot Earnings ($/day) Repayment Break-even Note: Repayment break-even is based on the average Suezmax price of the last 10 years, and 70% debt on standard terms 10
Slide 12: Freedom to Act Without Lender Pressure to Fix or Sell
FREEDOM TO ACT WITHOUT LENDER PRESSURE TO FIX OR SELL When freight markets are weak, long term rates are in contango, which can make lenders more comfortable with time charters. But fixing time charters at that time may not be the right decision As an example: a) In April 2016, Capesize bulk carrier
Slide 13: Ability to Execute Purchase of Vessels
ABILITY TO EXECUTE PURCHASE OF VESSELS Purchase (Oil Tankers) vs Suezmax 5 year old Purchase (DryBulk) Vs Panamax Drybulk 5 year old 62 60 58 19.00 56 54 52 17.00 50 48 46 44 15.00 42 40 38 13.00 Aug-15 Apr-16 Dec-16 Aug-17 Apr-18 Dec-18 Aug-19 Apr-20 Aug-15 Apr-16 Dec-16 Aug-17 Apr-18 Dec-18 Aug-19
Slide 14: Offshore Business
OFFSHORE BUSINESS 13
Slide 15: Greatship Evolution: The Last 5 Years
GREATSHIP EVOLUTION: THE LAST 5 YEARS • Most challenging years for the offshore sector since the late 80s. • Utilization levels across asset classes dropped to historic lows, charter rates came down to levels that barely generated any +ve EBIDTA. • Large part of the industry went through financial r
Slide 16: Cost Reduction: Enables Cash Flow Generation Even With Shallow Recovery
COST REDUCTION: ENABLES CASH FLOW GENERATION EVEN WITH SHALLOW RECOVERY Admin Cost (US$ Mn) Operating Cost (US$ Mn) 18.00 80.00 17.00 71.67 17.00 70.00 16.00 Down 32% Down 24% 15.00 60.00 14.00 48.59 12.89 50.00 13.00 40.00 12.00 11.00 30.00 10.00 FY 2016 FY 2020 FY 2016 FY 2020 Operating Cost Admin
Slide 17: Long Life Provides Great Optionality
LONG LIFE PROVIDES GREAT OPTIONALITY Charter rate (USD/day): A typical 1980s blt rig chartered Long in India residual life 160,000 Same rig written down to (avg rig nil, earns a rate of 140K!!! 140,000 fleet age: 8.5 yrs) 120,000 100,000 long downturn. asset 80,000 values close to scrap. 60,000 Grea
Slide 18: Transformation
TRANSFORMATION 17
Slide 19: Momentum Buying vs Value Buying Crude Tanker Vessels
MOMENTUM BUYING VS VALUE BUYING CRUDE TANKER VESSELS Purchase (Oil Tankers) vs Suezmax 5 year old 105 Momentum Buying 95 85 75 65 55 Value Buying 45 35 Suezmax 5 year Purchases 18
Slide 20: Momentum Buying vs Value Buying Drybulk Vessels
MOMENTUM BUYING VS VALUE BUYING DRYBULK VESSELS Purchase (DryBulk) Vs Panamax Drybulk 5 year old 90 Momentum Buying 80 70 60 50 40 30 Value Buying 20 10 Panamax Drybulk Purchases 19
Slide 21: GESCO Comparison Versus 10 Years Ago
GESCO COMPARISON VERSUS 10 YEARS AGO FY11 FY20 Remarks Average Ships 36 47 Available days 13,140 17,202 Average Age 10 12 EBITDA Fixed Earnings (FY20) (USD Mn) 126 172 (At same TCYs for both years) Average Capital Employed (USD Mn) 2,015 1,225 EBITDA Fixed Earnings (FY20)/Avg. Capital Employed 6.27%
Slide 22: Thank You
THANK YOU visit us at www.greatship.com 21
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