I first became aware of Dcix becouse i was investing in DCX (the parent company) when dcix was created. Dcx has a significant position in DCIX. Also DCIX manegment came from the DSX.
A little about DSX it is a very well ran company in a currently bad bussiness/ dry bulk shipping.
Beore 2008 day rates were in excess of 50k. While all the other shippers were taking on dept to grow thier companies, DSX cautiously grew the business and horded cash. Now with day rates around 10k and everyone else drownding in dept DSX is sitting on over 450 millon in cash and taking advantage of the cheap cost of shipps to increase fleet size. Also since the have low dept they are still profitable.They played the downturn to perfection.
Therefor I understand the SA author's concerns. However good managent is hard to find. DSX has proven they have good managment and I am trusting the DCIX is as well ran as the parent
The management has been much better than most of the other US traded bulker owners.
But I wouldn't say they played the downturn to perfection.
With all due perfect hindsight, the dry bulk ship purchases they made in 2011 were not good at all, considering how much the value of ships has fallen since then.
And the charters aren't good enough to make up for the $10 million each, drop in value over the last two years.
As to the purchases made in 2012, a five year old Panamax is now worth $17 million, and the charter rates they got were poor.
Add to that the Panamax value, and charters are expected to drop further in 2013.
As for the moves made at DCIX:
The three 1990's built ships that were bought from Mearsk cost $70 million.
They were signed to gross charters worth a combined $43.5 million. The charters expire this year into a market where they will be lucky to be rechartered for $9,000 per day. Which is below break even.
Or they can be scrapped for $9 million each. They are 23 years old.
All at a time when a huge amount of 10,000 TEU container ships are coming into the market.
As I said, in perfect hindsight.
I respectfully disagree. I have read numerous articles and research reports stating that dsx is among the best ran companies in the bulk shipping business. As for the value of the ships they purchased over the last couple of years, who cares these are new ships which they will own for years to come. The only reason they value has dropped is because currently there is a glut of ships on the market and allot of companies are in big financial trouble hence ships are being dumped on the market in a fire sale. Also ship builders have had to lower prices to entice buyers so they can stay in business. The point being that only companies who didn't go hog wild in 2007 and 2008 buying ships and taking on loads of dept can afford to buy new ships now. It is widely viewed that since dcx is sitting on a mountain of cash and very little debt that they are just waiting for bottom. They will then put that money to work and come out of this mess as a leader in the bulk business. As for the contacts they have singed they are still profitable at these rates. Which not allot of companies are. No one in the bulk shipping business is making any money at the current rates
So my point is that dsx has proven to me that they understand the shipping business and also know how to run a company. Since they have a stake in Dcix and management at dcix came from dsx i am trusting that they know and understand the shipping business a whole lot better than you and I. So time will tell weather my trust is misplaced or not.
You didn't exactly make it clear what advice you are seeking. If it is if DCIX is a good invesment, I can only tell you that I loaded the ship (no pun intended) at $6 during yesterday's sell off. I did the same with TEU a few weeks back at around $4.10 for a very nice profit (on paper anyway since I haven't sold).
My reasons for buying container ship companies are as follows:
I have read that as much as 90% of goods are transported by sea. Obviously with the resession trade is way down, but this won't last forever. Once the economy picks up these companies will become very profitable. This may not be as far off as you think.
Back in Oct. 2011 I bought TAL, a manufacturer and leasor of sea containers. That stock is up 80% since I bought on strong performance as is all it's competitors . Obviously the demand for sea containers is not driven by the need for goods to sit on shore. This tells me that shipping companies are not that far from picking up and I think DCIX and TEU are positioning themselves to profit nicely.
As for yesterday's SA article, I think people are giving that clown way too much credit for the sell off. Rather I think it was the hedgies that saw it as an opportunity to walk it down for a quick short profit. I bet by earnings this is back up near $7.
Disclosure: I am long TEU, DCIX and TAL.
P.S. dept is actually spelled debt.