Here is an interesting article that discusses the valuation of shipping companies. A good read.
The paradox, and a disheartening fact, in our opinion, remains that shipping companies are valued according to the value of their hard assets. There is zip premium for brand name (or “franchise”) value, for intellectual property, for charters and other contracts in place, for intangibles, and, regrettably for management expertise. And, if one adheres literally to the valuation definition, a below NAV valuation implies that the company’s management team not only does not add value to the firm, but, in a sense, is a liability to the firm. One gets the firm cheaper than one can buy the assets. Ouch!
Shipping company senior management need to come to the realization that this is a complicated issue. What the author fails to mention is that there may be other reasons for the market’s refusal to trade shipping stocks at NAV or a premium to NAV in most cases. That is the other risks is shipping.
Shipping Company Risks
Shipping companies face several significant risks, including economic uncertainties, cybersecurity threats, and volatility in fuel prices. Periods of economic downturns can lead to reduced consumer demand and decreased shipping volumes, potentially causing financial strain on shippers and disrupting supply chain relationships. The increasing digitization of maritime operations has introduced new risks such as cybersecurity threats, where cyberattacks can disrupt communication and compromise sensitive data. Additionally, volatility in fuel prices can significantly impact operational costs, affecting the overall economics of supply chain operations.
Other notable risks include the safety of shipments and the efficiency of booking and tracking operations. Meeting delivery commitments and ensuring the safety of the mode of delivery are critical for maintaining a company’s reputation and bottom line. In international trade, goods often travel long distances, making them vulnerable to risks such as loss, damage, or delay. Proactive management of these risks is essential for setting a business up for success and mitigating the chaos and disruptions that have become more common in the post-Covid world.
This is an AI answer to the risk question. Hamish Norton might consider addressing these risks for the investment community to make investors more comfortable. Not just looking at corporate finance tricks for the way out.