Value observationsin the shipping sector

www.pwc.com

2nd Annual Capital Link Greek Shipping Forum22 February 2011

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Defining value…

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What is Value?

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Value is like beauty…

it’s in the eye of the beholder

…and the answer

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Value relationship

4

Value of Shipping Companies

Vessels’ value

Net Asset Value

(Equity)

Market Cap

Net Debt

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Overview of Dry/Wet market over the period 2007-2009

5

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Most dry bulk companies consistently trading below their NAV since 2008

Notes:

- Market Caps have been calculated as the 2 month average after the reporting date.

- Non controlling interest has been excluded from the NAVs.

- BDI presents the Baltic Dry Index 2 month average (January – February of 2008, 2009, 2010).

6

24

810

1

2119

7022

1361

2923

0

1000

2000

3000

4000

5000

6000

7000

8000

0

5

10

15

20

25

30

2007 2008 2009

Balti

c Dr

y In

dex

# of

com

pani

es

Market capitalisation vs. Net Asset Value performance

Trading at a premium Trading at a discount BDI

Source: Published Financial Statements, Reuters, Clarkson Research

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Dry bulk - less companies trading below NAV in 2009 and at lower discount

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Source: Published Financial Statements, Reuters

22

5 4

2 3

6

12 13

1

9

6

-

5

10

15

20

25

2007 2008 2009

# of

com

pani

es

Premium > 50% Premium < 50% Discount < 50% Discount > 50%

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Wet market trend is similar to that of dry market

8

Notes:

- Market Caps have been calculated as the 2 month average after the reporting date.

- Non controlling interest has been excluded from the NAVs.

- BCTI and BDTI present the Baltic Clean & Dirty Tanker Indices 2 month average (January – February of 2008, 2009, 2010).

19

8

10

1

1211

1244

654

1035

0

200

400

600

800

1000

1200

1400

0

4

8

12

16

20

2007 2008 2009

BC

T &

BD

T In

dice

s

# of

com

pani

es

Market capitalisation vs. Net Asset Value performance

Trading at a premium Trading at a discount BDTI

Source: Published Financial Statements, Reuters, Clarkson Research

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Tankers – more companies trading above NAV in 2009

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Source: Published Financial Statements, Reuters

15

6 6

4

2

4

1

87

4 4

0

2

4

6

8

10

12

14

16

2007 2008 2009

# of

com

pani

es

Premium > 50% Premium < 50% Discount < 50% Discount > 50%

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Containers – different trend to wet and dry sectors…Why ?

Notes:

- Market Caps have been calculated as the 2 month average after the reporting date.- Non controlling interest has been excluded from the NAVs.

10

8

2

8

3

10

4

1

4

7

10

13

2007 2008 2009

# of

com

pani

es

Market capitalisation vs. Net Asset Value performance

Trading at a premium Trading at a discount

Source: Published Financial Statements, Reuters

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Quantitative / Qualitative Analysis (2009 data)

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Dry bulk sector – 3 companies illustration

12

Source: Published Financial Statements, Reuters

Company2007

trading at2008

trading at2009

trading at

D1 Premium Premium Premium

D2 n/a Premium Premium

D3 Premium Discount Discount

168.8%

35.6% 14.5%

1071.2%

467.6%507.1%

-48.1% -67.0%

-300%

-100%

100%

300%

500%

700%

900%

1100%

2007 2008 2009

Market Cap vs. NAV performance

D1 D2 D3

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Dry bulk sector – 3 companies illustration Common factors

• All three companies are listed on NYSE

• All companies have a fleet size exceeding 1.1 million dwt

• Vessels’ market values are not disclosed in the financial statements

• No impairment recorded in 2009

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Dry bulk sector – 2009 data (MC Q1 2010)

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Source: 2009 Published Financial Statements

Criteria Assessed Company D1at Premium

Company D2at Premium

Company D3at Discount

Long Term Contracts Coverage

100% of fleet on TC(45% of TCs expire in

2010-2011;Remaining expire by 2016)

100% of fleet on TC(38% of TCs expire in

2010-2011;Remaining expire by 2016)

68% of fleet on TC(87% of TCs expire in

2010-2011;Remaining expire by 2016)

Dividend Policy No Dividend since Q4 2008 Yes, stable No Dividend since Q4 2008

Average Fleet Age(in years)

4.8 3.6 9.7

Debt Issues None None Breach of covenants / waivers agreed

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Tanker sector – 3 companies illustration

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Source: Published Financial Statements, Reuters

Company2007

trading at2008

trading at2009

trading at

T1 Premium Premium Premium

T2 Premium Discount Discount

T3 Premium Discount Discount

316.0%

72.9%

121.6%

33.9%

-35.7%

-71.0%

81.4%

-5.2% -18.3%

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

350%

2007 2008 2009

Market Cap vs. NAV performance

T1 T2 T3

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Tanker sector – 3 companies illustration Common factors

• T1 and T2 are listed on NASDAQ, while T3 is listed on NYSE

• All companies have a fleet size exceeding 0.7 million dwt

• Vessels’ market values are not disclosed in the financial statements

• Only T3 recorded an impairment on vessels in 2009

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Tanker sector – 2009 data (Q1 2010 MC)

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Source: 2009 Published Financial Statements

Criteria Assessed Company T1at Premium

Company T2at Discount

Company T3at Discount

Long Term Contracts Coverage

94% of fleet on TC(65% of TCs expire in

2010-2011;Remaining expire by 2018)

50% of fleet on TC(17% of TCs expire in

2010-2011;Remaining expire by 2015)

67% of fleet on TC(68% of TCs expire in

2010-2011;Remaining expire by 2014)

Dividend Policy Yes (increasing since 2007) Yes (decreasing since 2009) Yes (decreasing since 2009)

Average Fleet Age(in years)

3.5 3.3 6.8

Debt Issues Covenants amended Under negotiation to obtain waivers

None

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Conclusion

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Potential factors affecting value

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Factors that may be influenced by Management:

• Dividend Policy

• Time Charter Coverage

• Fleet Age

• Governance / Transparency

Factors which are outside Management’s control:

• Economic Outlook / Market Conditions

• Investor Sentiment

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Final Thoughts

20

«’Ετεόν δε ουδέν ίδμεν. Εν βυθώ γαρ η αλήθεια.»

“We know nothing for sure: truth is hidden at the bottom of the ocean.”

Bridging Value to Accounting

• Purchase Price Allocation

― Assigning fair values to company’s balance sheet

― Recognizing intangibles like backlog assets/liabilities

Thank you

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