Please use this identifier to cite or link to this item:
Title: Investment outlook for the medium range tanker segment from the perspective of a ship financier from 2011 to 2015
Authors: Ma, Aiping
Keywords: DRNTU::Engineering::Maritime studies::Maritime management and business
Issue Date: 2011
Abstract: This research is to provide the freight market outlook for the MR product tanker segment in the East of Suez market from 2011 to 2015 and determine whether investors should venture into this shipping market segment. Firstly, the investment potential of the MR tanker market is investigated based on the market risk and return. The average Return on Equity (ROE) of the MR tanker companies is higher than the average shipping industry with similar risk profile. By comparing with the average required rate of return against S&P 500 using CAPM model, the average ROE of the MR tanker companies is also higher, but with higher risks. As an investment option, investors can consider venturing into the MR product tanker market while taking the market risk. Next, the research analyses the demand and supply factors of the MR product tanker market. Demand and supply fundamentals collected from past research papers, which will in turn affect the returns of shipping companies and investors, are identified. By analyzing the relationship of various factors, the impact of these factors on the freight market is derived. Based on proven factors’ current trend and future sentiments, the demand of ships will increase while the supply of ships have little increase compared to that of 2010. The freight market in the next 5 years is forecast to be from USD5, 000 to USD15, 000/day. With the freight forecast for the next five years, the economic feasibility of investing into the MR product tanker segment is evaluated in different scenarios: buy new ships, buy second-hand ships and time-charter in ships. Through the sensitivity analysis of Net Present Value (NPV) of a vessel, the positive NPV of buying a ship is only obtained at a freight rate of USD12, 000/day or above with WACC values ranging from 1% to 16%. The MR tanker companies will have low possibility of generating positive NPV in the next 5 years. It is also not profitable to time-charter in ships as the market Time Charter Equivalent (TCE) is not able to cover the current Time-charter rates. Since the MR tanker companies have low possibility to make profits from 2011 to 2015, the investors are advised not to venture into this market segment.
Rights: Nanyang Technological University
Fulltext Permission: restricted
Fulltext Availability: With Fulltext
Appears in Collections:CEE Student Reports (FYP/IA/PA/PI)

Files in This Item:
File Description SizeFormat 
  Restricted Access
2.2 MBAdobe PDFView/Open

Google ScholarTM


Items in DR-NTU are protected by copyright, with all rights reserved, unless otherwise indicated.