Go Carriers on route to expansion and doubling of revenues. Michael Tartsinis, CEO of Global Oceanic Carriers (Go Carriers), a Hellenic dry bulk shipping company listed in AIM (Alternative Investment Market) of the London
Stock Exchange is interviewed by Hellenic Shipping News, sharing his company?s vision for the future. Go Carriers recently added two vessels onboard, currently controlling five vessels. The company?s management will now focus on identifying new investment opportunities in the second hand market, seeking vessels of 10-15 years of age.
The new management headed by Mr. Tartsinis took control of Go Carriers last year, through Antares Shipmanagement and after resolving a possible battle with an affiliated company of the Fidakis Group, also after Go Carriers. Since then, they have implemented a restructuring programme, which not only returned the company into profitability, but also is on track to almost doubling its gross revenues during 2007.
Could you give us some details on the company's main shareholders and their holdings?
Although the company's shares are free-floated by 100 percent, about 78 percent is controlled by three main shareholders, a private equity fund and a hedge fund, both based in Great Britain and the company's Board of Directors, which also acts as the management team of the company. Antares Shipmanagement, the operator of Go Carriers? activities and was founded about four years ago, by myself and local shipping entrepreneur Mr. Papadakis. Though this company we acquired Go Carriers stocks and we managed to control about 19 percent. A little while ago, Mr. Papadakis sold his percentage of the stocks. So, now Antares controls 16.5 percent of the stock, while the remaining of the 78 percent is controlled by the two funds.
How did you gain control of Go Carriers?
About ten months ago, the company's stock was trading way below its true value, thus being the perfect target for a number of investors who were looking to find a quick way of entering the stock market. It was then that the Fidakis Group challenged the Board of Directors through an affiliated company, to hold an extraordinary general meeting of shareholders, in order to gain control over the management of Go Carriers and go ahead with a specific plan to develop the company. At the same time, we were also investing in the company?s stock, acquiring stocks and controlling about 18 percent of the company's share capital, much in the way that Fidakis Group also operated, who managed to get about 15% of the company. In order to avoid a dreadful conflict, we came into understanding with Fidakis and held a shoot-out process, which resulted in Antares controlling about 60 percent of the company. We then changed the composition of the Board of Directors, by appointing Mr. Antonis Nikolaou as executive member and Mr. Papadakis as non-executive member, while myself was elected as CEO. It was then, that we began our restructuring plan to further develop the company.
Go Carriers entered AIM (Alternative Investment Market) of LSE at a very good momentum in May 2005. But later on, things evolved in a negative manner, due to the fall of the market and the shareholder base. Also, the company had some deficiencies and inefficiencies, but not in a bad sense. It was simply organized in the wrong way. For instance, ship management was based in Hellas, along with the CEO, while the company's Chief Financial Officer was based in Scotland and the auditors weren't familiar with the shipping industry.
We took over in June of 2006 and in August, due to the positive market momentum, we managed to add two more vessels in the company's fleet, raising the total number in five. On September we appointed Christina Anagnostara as CFO and later on she took a place in the Board of Directors.
If, hypothetically, you had the chance to move the company in the New York Stock Exchange overnight, would you go ahead?
In any case we have to consider the pros and cons of such a move. There is no doubt that the New York market is more mature and has many investors with a lot of money to spend. On the other hand, in order to approach the U.S. market, your company must have substantial operating results. At the moment, Go Carriers is a small company. Our goal is to double the company's size and reach a market capitalization of $200 million from today's $65 million, while increasing our assets from $150 million to $300 million and then maybe we'll discuss a possible floatation in New York. Nevertheless, we have to take into consideration that the U.S. market is much more demanding in terms of compliance. Another possibility is the main index of LSE, which is also quite deep.
Which is the company's investment programme? Does the management intend to move forward in 2007 with new second hand vessels purchases, or newbuilding orders?
I have to say that newbuilding is easier these days, because of the access to financing, while there's always the option of contract resale, leaving profits in a short period of time. Despite that, our plan doesn't focus on newbuildings, but on second hand vessels at the age of 10-15 years old. We can't go in the market looking for a modern capesize, let's say built in 2004, because the price tag of $110 million is close to 50% of the company's assets. But in vessels of an older age, like the one mentioned, provide a solid yield on investment, they are of good quality condition-wise and their future perspectives allow the owner to trade them for about two more freight cycles. All these parameters accommodate our company's investment preferences, both in terms of income and asset value.
In terms of sizes, we believe that every size suits us. Our current fleet is consisted from ships ranging from handy up to capesize and that's where we'll focus for the new acquisitions, covering all sizes. This mixture is the best, since it provides us with the necessary flexibility to bid in all possible cargoes and routes.
Depending on one owner's fleet capacity and age, which do you think is the better option in today's dry bulk market conditions, spot or time-charter?
Undoubtedly, both spot market and time-charter now are very strong. The question is the beginning point of each company. For instance, if a ship owner has acquired and paid off a vessel within the last three years, spot market is the best option, because he can afford the higher risk involved. If on the other hand, the vessel has been bought in high market prices and the cost hasn't yet been repaid, one has to be more careful. History has taught us that freight markets can be tricky and full of surprises, so you have to implement the proper risk management policies and take advantage of the high market rates with a rapid amortization of investment and proceed accordingly. Of course, if we're talking about large fleets, the ship owner has the ability to market some of those in the spot market, but maintaining the larger part in time-charter deals, in order to have a strong base of cash inflows. If we're talking about listed companies, management has to take into consideration the investor's interests and avoid risky policies, given the volatile nature of freight markets. It?s better to go for a slightly lower but more secure profit, than the other way around.
Could you highlight a couple of routes that are considered very profitable today?
Well, at the current high market conditions, all routes are traded with high prices. But, capesize routes are a bit higher than the rest of the market, with an example being the route Barau-China. Another example is the panamax route for grains from the U.S. Gulf Coast to Europe.
During the last couple of years we've seen a new type of bulk carrier entering the market, the kamsarmax size, with about 80,000-dwt, like a large panamax.
Does this quantity and sophistication of ship types and sizes make things more difficult for a ship owner, in order to make the right investment choices?
Kamsarmaxes are mainly used for loadings from the port of Kamsar in New Guinea of West Africa, which has the necessary drought to accommodate such sizes. But now, an even newer type is arising, the post-panamaxes, whose width will be larger than 32 meters and they shall have a dwt of about 90,000. Their appearance has to do with the expansion of the Panama Canal.
What's for sure, in the future, if a large number of these ships enter the market eventually, we shall see a shrinking of the ton/mile ratio, resulting in more days out of service for each vessel, which in turn will cause the market to drop. These things need thorough planning and study. Historically, each time the ships capacity was growing, we were seeing a negative impact in the market, until it found a new balance.
Which are the flag-states under which Go Carriers ships operate? Do you believe that the recent measures undertaken by the Hellenic Ministry of Mercantile Shipping to make the Hellenic flag more competitive will change the attitude of ship owners towards it?
First of all, we are listed in the registries of Bahamas, Cyprus and Malta. Although I'm not very familiar with the latest moves by the Ministry, I can tell you that everything has to do with the crew's composition. The lowering of the Hellenic seafarers required to man each vessel under the Hellenic Registry is the most important step that has increased the attractiveness of the flag. A large portion of the Hellenic companies always uses Greeks as captain and first engineer for their vessels, regardless of the flag. So the big sum is paid nevertheless. If the price difference between the Hellenic and foreign flags is lower, for instance about $300-$400, it?s worth looking at this option as well. Another important issue is the scarcity of foreign crews these days, due to the big increase of demand, occurring from the healthy prospects of the market and the bigger vessels entering into service. As a result, the salary differences between foreigners and Greeks aren?t that big as in the past.
Do you believe that at present Go Carriers has the strength to fend off potential hostile bids (especially with the recent return to profitability), or would you say that the management is always open in new investment opportunities and strategic partnerships?
In terms of shareholder base or management, yes we are in such a position to avoid any hostile bids. But I have to admit that all things bear a price. We?re always open to new business proposals, provided that the price we receive meets our expectations and is in line with the company's true value, benefiting our investors? interests.
The company announced a rather attractive and aggressive dividend policy by distributing 50% of net income. Do you believe that this move will help bring new shareholders?
Of course, and this was one of the reasons we did it. I can tell from the preliminary reactions we received, that it was seen in a very positive way. The good thing is that the large dividend doesn?t hinder our efforts to further expand the company's fleet, since we have a significant cash flow.
Would you say that the investor's sentiment towards AIM has changed in the last few months, against a rather bumpy start? Is the investor sentiment positive against shipping companies like GO Carriers?
The answer is yes, at least for other industries. If one takes a look at the companies now listed in AIM, their market capitalization and their overall business, we would come easily come to the conclusion that the market has grown into a major one, while it is much more flexible than other markets and less demanding in terms of paperwork. Regarding shipping in particular, despite the fact that London is more experienced in this industry than New York, investors are less keen in entering the market. But I can tell you that many shipping companies are now trying to float in the London market and in the short-term things will change for the better, especially if the current euphoric trend in the stock markets continues. We?d like to see more shipping companies entering AIM, because at the moment there is no benchmark for comparison, between Go Carriers and the competition. We are the only shipping company listed in AIM.
Going forward in 2007, what are the management's predictions on the company's future earnings, given that the company opted for fixed time-charters?
Nikos Roussanoglou, Hellenic Shipping News Worldwide
Last year the company reached earnings of about $20 million. For 2007, our predictions say that gross earnings will almost double to bout $38 million. Excluding the fact that we added two more vessels in the fleet, we have to take into account that last year?s bookings were made in a period of low charter rates, something that didn?t happen for this year. What?s more important is that we managed to keep expenses low.