DCIX has already added 35 cents since DSX bought shares. It means almost 9 cents/share addition to DSX earnings. It looks, for this specific short-term period (less than a month), as not the worst investment.
Also, as it becomes clearer now, DSX was a good buy in 9s. Congratulations to all lucky buyers.
Both gold and silver move based on mostly macro-economic considerations. It makes them almost identical in long run. However, in short term gold used to react on specific geopolitical events stronger than silver. For example, as of now gold reacts to events in Ukraine stronger than silver does. More specifically, when someone (imaginary market participant) suddenly runs for cover, it looks for gold, primarily, to cover retreat.
Don't forget about long-term investments having impact on earnings, because of mark-to-market re-calculation every quarter. DSX owns about 20M shares of DCIX now, most of them new shares at $2.50. Every 4 cents change in DCIX share price means 1 cent impact to DSX earnings per share.
By the way, it must be noted that past awful performance in DCIX shares negatively impacted DSX earnings for long time, though impact was less pronounced, because share ownership was much smaller than now.
DCIX buys two ships investing $45M, obviously taken from share sale proceeds subscribed by DSX. It is also obvious that DSX/DCIX management likes vessel prices in containerships better than dry-bulk prices.
Actually, DCIX was always an "investment" for DSX. It was created (spun off) by DSX few years ago; probably, because management expected to make killing on resurgent containership market. It didn't really work, unless shareholder corpses can be considered as a definite proof of "killing". It is still unknown, especially after initial "killing", whether this dog can ever hunt, even with this new cash infusion.
Regarding DSX itself, it is still better than many peers, especially in terms of downside protection, so your purchase has good chance to end up successfully, i.e. with gains. Market really expect better rates ahead, though DSX management will likely dissent, as usual, during tomorrow call. Good luck with your DSX shares and don't get greedy when you have, hopefully soon, capital gains on hands.
Obviously, management still hopes that cascading ends soon. Anyway, company journey to containerships was a big blunder; hopefully, honest mistake. DCIX got 100% dilution today, it is an almost recapitalization. On the other hand, it indicates that management is more optimistic on containerships. Probably, they don't like high, relative to BDI, vessel prices in dry-bulk, and decided to move cash to greener pastures.
I don't think that DCIX announcement will have too big impact on share price. I would rather see today's share price move as related to tomorrow's earning report.
It is another story that you probably overpaid a bit, i..e paying ~$10/share was a bit high relevant to present shipping rates (BDI). However, BDI can change quickly and when/if it gets to mid-high 800s, present DSX share price would be more in line. Hopefully, low BDI is a short-term phenomenon and your relative over-payment will dissipate soon. After all, no one can guarantee that share price drops to $9 after the earning report.
P/E is a bit high, but it is Ok taking into account strong balance sheet and low P/B.
The actual problem, imho, is that market hates small-caps at the moment and this stock is illiquid. The latter makes it vulnerable to ETF/mutual fund selling. I don't know whether GIFI is part of Russell; probably, it is. Every time Russell and all funds linked to it have sell-off (it happens often these days) it means automatic selling and even if it's only few thousand shares, it is enough to kill share price. Illiquid and so it suffers collateral damage. It is fun to own an illiquid stock when small-cap goes up and it is the opposite now.
Hello! I didn't see your message and apologize for late reply.
The reason is that I "am not there" and this makes me poorly qualified to answer your specific question. In my opinion, it will be better time to re-visit "small producers" or even "big producers" somewhere in 2016 or even in 2017. Needless to say, any forecast has big chance to be wrong and long-term assumptions are wrong, for sure :)
Good luck with your investments and, hopefully, we will find each other on some "small producer" message board 2-3 years from now.
Probably, it makes sense to remind about specific industry point that can sometimes cause big difference between spot and charter. Sometimes, the reason comes from the fact that in this sector it usually costs more to idle assets (ships) than leasing them out for very little (with loss) money. It creates sometimes situations when ship owners, already losing money, become desperate and agree to lease ships for very low rate just because it is still better than mothballing.
I believe most people around know why mothballing can cost more (i.e. bring more losses) than low-rate lease. If someone doesn't know then feel free to ask for more detailed explanations.
Obviously, this situation gives charterers better bargaining position when they deal with money-losing ship owners and, conversely, it puts financially sound ship owners in better bargaining position allowing them to get better rates. Also, the same rationale (better lease for little than keep it idle) can explain why very low numbers go specifically to spot rates. Desperate ship owners can accept losing money on spot, consoling themselves with the point that spot rate varies quickly. Locking in long-term money-losing charter could be for them just unbearable, both emotionally and financially.
Eriktrade, the more correct argument would be not that DSX is a "great company" or that balance sheet is the best. The major point regarding DSX is that this company doesn't lose money even in present challenging environment. It means that it still controls own future. Does it mean that any person must buy shares now? Not at all. DSX always presented good investment opportunity because it is a comparatively transparent company disclosing all numbers to retail investors. Outsiders can see the numbers and make own informed decision.
Regardiing book value, it should be noted that it has little meaning in this sector. Essentially, it is money that companies paid for ships bought in different times. Shipping prices vary. Do some shipping stocks trade with premium to book, while others go with discount? It is the most natural situation, because they all trade with no correlation to book values.
Present sector situation still carries good deal of investor optimism. Firstly, many people still expect near-term surge in rates. Secondly, overall market is very strong (better say, it looks very strong). This sentiment can distort share prices. Please note that DSX was always a laggard when it came to following positive near-term sentiment. In other words, DSX always (comparing to other sector plays) presented more protection on downside than reward to upside. It is changing actually, but long-term reputation is something that changes very slow.
The most recent purchase and chartering of new capsize may reveal company philosophy behind “perpetual preferred shares" issue few months ago. Both deals are about the same in size. Share sale proceeds were around $60M, while new ship was bought for $58M.
New shares carry sizable dividend rate, 8.875%, but they don’t bring any other obligations to the company except "liquidation $25/par value", i.e. company basically got $60M with only obligation to pay around $5M in annual dividends. It differs from bond sale when principal must be re-paid.
On the other hand, by signing new cape for about $25K/day, company makes about 13K-14K/day in free cash flow ($$ after all cash expenses). It makes for about the same $5M/year.
It can be assumed that DSX planned new capesize purchase for some time, before the announcement, and possibly they arranged the preferred sale for specific purpose: buy new ship that could cover all dividend payments. If rates go up from now then company can make more than just justify the sale. Also, ships have “residual value”. When they're done (after 20-25 or more years of service) they are sold to scrap and cape can bring in good money; maybe $15-20M (I didn’t check scrap prices recently, and so I apologize for approximate numbers here).
Needless to say that in case rates go down this share sale will be less attractive. Please note that dividend is not counted against earnings; it affects cash flow only. Also, dilution was small because company sold shares for $25/share, i.e. much higher than market price.
Copper demand is robust and warehouse storage numbers are very low. Also, rumors about Chinese break-down were slightly exaggerated, as it always happens with the rumors propagated around time of Chinese New year. Hint: China has vested interest to keep major commodity prices low.
SCCO runs on positive momentum now and it can be sufficient to get in mid-to-high 30s around time of next earning release.
New capesize ship has been chartered for very profitable rate. It adds about $11K/day to company earnings ($4M or 5 cents/share annually). DSX has another cape ship waiting for renewal this year. It is currently employed with rate about twice lower than presently announced. It can provide another positive support to earnings.
It is too funny, but I have to make addition to the preceding post. It is necessary knowing history of this board :).
I used an expression "U S-based person" (no spaces). It seemed to be innocent, but by some reason Yahoo filter decided it as a profanity. It is too funny.
All flow-through shares get sold to Canadian investors. It would be hard to find #$%$-based person willing to pay formal premium to share price and get no tax benefits in exchange.
I feel it's necessary to explain how "flow-through" mining shares work in Canada. It means, in short, that company passes future exploration expenses (coming from stock sale proceeds) to new shareholders. For example, if (for simplicity sake) all flow-thorough shares are bought by single person (Mr.X) and then company spends all proceeds on mining exploration in Canada then, according to Canadian tax laws, it means that all this expense was incurred personally by Mr.X, not by the company; and Mr.X is entitled to deduct this expense from taxable income. If Mr.X has federal marginal tax rate in 25-30% range (I don't know exact number, but guessing Canadian taxes are even higher) then he gets substantial gain to show against this stock trade.
More specifically, if Mr.X buys flow-through shares for 1.70 and keeps them long enough to get all exploration done for this money, then he can sell for the same1.70 (if it's possible) and still pocket substantial gain (completely tax-free!). God bless Canada.
PS: I apologize in advance for possible inaccuracies in explanations above. Please note that I am not a professional tax specialist and I don't live in Canada.
New law proposes, besides other mining incentives, to limit EIS (environmental impact statement) approval time to 30 days. It takes now about a year to get such approval in Canada, and it can take longer than human life in U.S.
Canadian flow-through shares carry big tax-credit discount to buyers, 25-30% in average. It means that shares are sold for about $1.20, after tax discount.
Peruvian congress considers new law promising 15 year stable tax jurisdiction for new mining projects in Peru. No tax increases for many years to come. Search Google news for "peru mining tax". The official goal is to promote mining investment in the country.
This new law is proposed by President and has broad bi-partisan support, it will be adopted soon. It is a good confirmation of favorable mining regime. Peru has become one of the best mining jurisdictions in Latin America, surpassing Chile and Mexico.
SCCO expansion in Peru is on relatively good geopolitical track. Current government is surprisingly pro-business. There were grave concerns about Ollanta when he came to power and he proved them wrong. Serious political opposition is even more pro-business. It promises many years of stable mining development in the country.