Shipping / STX PO

Shipping / STX PO: Deutsche highlights from the Marine Money conference in Singapore.
i) Shipping companies are expected to find it tougher to raise financing in an environment of weak freight rates and soft second hand prices.
ii) Smaller ship owners will find it tougher as banks generally see them as riskier.
iii) Shipping banks are generally cautious as they do not want to end up owning vessels. The ship financing market is unlikely to return to the pre‐2008 global financial crisis level in terms of rates and size.
iv) Shipping companies will likely have to turn to capital markets (including equity markets) to supplement bank financing, especially when they are looking to fund their current orderbook.
v) Chinese RMB bank lending for shipping has decelerated due to the higher reserve requirements imposed on lenders.

Deutsche reiterates that it does not expect a strong uptrend in dry bulk, tanker and container shipping rates over coming months. Highlights, Hanjin Shipping surprised by announcing a rights issue last Friday, which resulted in negative share price reaction. Notes companies expected to end 2011E with net gearing of > 100% are STX PO (122%), and Hanjin Shipping (328%, before any equity issue) and Yang Ming Marine (158%).