GESHIP - Great Eastern Shipping Co. Ltd. Share Price

Outlook and Major Points from Management:

1. Market Conditions:

   • Tankers (Crude & Product): Disappointing winter spike with subdued rates. Weak oil demand growth, reduced refinery margins, and increased order books (23% for product tankers, 10% for crude). Asset prices dropped ~15%, more for older vessels.
   • Dry Bulk: Weak due to slow Chinese demand, lower iron ore/coal trades, and grain trade declines. Fleet growth (~10% order book) but aging fleet.
   • LPG: Rates normalized post-Panama Canal disruptions, but asset values remain elevated (28% order book).
   • Offshore: Gradual recovery in jack-up rigs, though contract disputes and re-pricing risks persist.

2. Financial Position:

   • Strong Liquidity: Net cash of ~$500M (standalone), enabling readiness for market downturns or acquisitions.
   • Dividend Track Record: 12th consecutive quarterly dividend declared.

3. Strategic Focus:

   • Asset Purchases: Prefer second-hand ships over new builds. Awaiting attractive valuations amid high order books.
   • Growth Timing: Expansion likely during market lows (similar to 2016-2018 cycle), balancing in-charters vs. purchases.

4. External Factors:

   • Sanctions Impact: Potential market tightening if enforced (3-5% crude fleet impacted), but uncertainty remains.
   • Geopolitical Risks: Red Sea normalization could affect product tankers; Chinese demand and global trade shifts pivotal.

5. Outlook:

   • Cautious near-term due to weak freight rates and asset price corrections. Long-term growth hinges on disciplined capital allocation and opportunistic expansions during market lows.

Major Questions and Summarized Answers:

1. Question: Why have product tanker asset prices fallen more sharply than crude tankers?
   Answer: The sharper decline in product tanker values aligns with lower charter rates (below $20,000/day) and accelerated corrections for older vessels. Crude tankers experienced milder declines due to relatively stable demand.

2. Question: How have Capesize vessels delivered returns despite low Chinese construction activity?
   Answer: Chinese steel exports (doubling to 120M tons) and reduced domestic iron ore production supported iron ore imports, sustaining Capesize demand despite weak real estate activity. Sub-capes faced greater weakness due to lower grain/coal trade.

3. Question: Was the $150M fleet value decline specific to shipping, and are offshore asset values impacted?
   Answer: The $150M drop applied only to shipping assets. Offshore rig values remain unchanged, with valuations updated semi-annually and no recent transactions indicating material shifts.

4. Question: What is the impact of recent tanker sanctions, and what % of the fleet is affected?
   Answer: Sanctions targeted ~3-4% of the global crude fleet (180 vessels), primarily transporting Russian oil. If these ships exit legitimate trade, market tightness may arise, but rerouting/obscured trades could mitigate disruptions.

5. Question: How would Red Sea normalization affect freight rates?
   Answer: Neutral for crude tankers (trade rebalancing), negative for product tankers (reduced rerouting premiums), and minimal for dry bulk. Current disruptions remain tied to geopolitical risks.

6. Question: What is the capital allocation strategy given high cash reserves?
   Answer: Prioritizing second-hand vessel acquisitions over new builds. No immediate buyback plans; growth depends on asset price corrections aligning with return thresholds.

7. Question: Where will growth come from amid weak market triggers?
   Answer: Growth is cyclical, focusing on opportunistic fleet expansions during market downturns (e.g., 2016-18). Current patience preserves liquidity for future investments when asset values correct.

8. Question: What is offshore's net cash position, and how does dollar strength affect asset prices?
   Answer: Offshore net cash is $40M. Fleet value declines are driven by earnings/order-book trends, not dollar movements, with minimal currency linkage.

9. Question: Are rigs being mobilized internationally, or is domestic focus prioritized?
   Answer: Actively exploring global opportunities, but recent tenders are domestic. Rig repricings (e.g., H2 FY25) have boosted rates, though one rig faces contract termination disputes.

10. Question: Why in-charter ships if asset prices fall? Shouldn't buying be preferable?
    Answer: In-charters provide market exposure without capital commitment. Asset prices, though down 15%, remain elevated; purchasing awaits further corrections to meet return benchmarks.