Harbor Star Shipping Services Inc. Fundamental Stock Investing

Disclaimer: The author is not an investment professional. The author is not in any way related to or representative of the following companies. The author does not take responsibility for the accuracy of the information and sources of information are given reference. The purpose of this is to filter, review and comprehend the available data that might be useful to common stock investors. This article is not a buy recommendation, but rather an analysis by the author for his own personal use, simply shared in this blog so that it may be read by others of with the same interests. It does not serve as a buy or sell recommendation, and investors are advised to conduct their due diligence or consult with an investment professional.

Harbor Star Shipping Services, Inc. is one of the leading Filipino providers of harbor assistance, lighterage, towage, salvage, and other marine services. The company was registered with the SEC on July 5, 1988, but only in 1999 did the company launch official operations as a one-tug boat services provider at the port of Subic. In 14 years it has garnered various accreditations and licenses and expanded its fleet. Currently it maintains a fleet of:

(27) tug boats

(1)   anchor handling tug supply

(3) barges

(1) cargo vessel

(1) oil spill response vessel

Risk: capital intensive business.

Today Harbor Star has established operations in 12 base ports all over the country, including:

1. Manila International Container Terminal

2. Bataan

3. Batanggas

4. Cagayan de Oro

5. Davao

Harbor Star is the only harbor assistance provider that operates at MICT, the country's busiest port for containerized vessels.

Risk: A significant amount of Harbor Star's business is done without long-term contracts. This increases the risk of losing clients to competitors.

Services approximately 5,658 ship calls in 2012, (92.12%) of which are foreign ship calls.

Listing date on October 30, 2013 

of 181,600,000 common stock at an offer price of P1.88 per offer share.

Par value is P1.

Aggregate Offer Price: P341,408,000.

Offer shares represent 30% of issued and outstanding shares after the offer.

After completion of offer the issued and outstanding common shares are 605,238,580

Lock up period of 180 days after listing date for those who own 10%.

180 days later will be April 28, 2014, Monday.

Net proceeds of the IPO will be used for:

[a] the settlement of the bridge loan for the purchase of Anchor Handling Tug Supply Vessel "AHTS"

[b] the acquisition of tug boats for domestic and international expansion and re-fleeting

[c] debt retirement

[d] the acquisition of Landing Craft Transport barge "LCT" or tug and barge tandem for lighterage operations

"Lighterage" is defined as the offshore ship-to-ship transfer of various oil, petroleum, and mineral products from larger to smaller vessels capable of entering shallow-draft ports.

On September 23, 2013 the Board of Directors resolved to approve a dividend policy declaring at least 20% of it's prior year net income as dividends.

Here's the link of the video of the IPO:

http://youtu.be/FkYkTwHmlXA

Summary of Financial Information

                   Revenues         Net Income       Outstanding Shares     Earnings Per Share

2010      P 543,605,000   P   26,174,000        605,238,580                  P 0.043

2011      P 737,733,000   P 131,764,000        605,238,580                  P 0.218

2012      P 807,264,000   P 147,812,000        605,238,580                  P 0.244

2013*     P 426,794,000*  P   51,514,000        605,238,580                  P 0.085

P/E Ratio

2010    43.72

2011      8.62

2012      7.70

2013*   22.18*

2013     5.04

                     Book value / Equity      Shares Outstanding       Book value per share

2010                P 290,542,000             605,238,580                      P 0.48

2011                P 743,130,000             605,238,580                      P 1.28

2012                P 890,793,000             605,238,580                      P 1.47

2013*              P 922,079,000                                                        P 1.57*

2013**                                                  605,238,580                      P 1.60**

2013 actual book value                                                                  P 2.13

Price to book value ratio:

2010      3.92

2011      1.47

2012      1.28 

2013**    1.18

Hypothetical dividends of 20% using EPS  

2010      P 0.0086

2011      P 0.04

2012      P 0.0488

2013**   P 0.017

*period ended 6 months, June 30, 2013

**pro-forma net tangible book value per share AFTER THE OFFER

Earnings from the official prospectus: 

Balance sheet from the official prospectus:

Capitalization from the official prospectus:

Dilution, from the official prospectus:

BOTTOM LINE:

I do not want to prophesize what may happen to this stock. The market price peaked and had been falling ever since. Honestly, I do not know much about the experience, ability and expertise of the management except that it is predominantly Filipino, and that the company has managed to expand its fleet from 1 to 27 tugboats in a span of 14 years, in addition to other vessels and accreditations.

The price is cheap when it comes to earnings at a hypothetical P/E ratio of 7.70. The price does not have a high premium above the purchasing value of the equipment/assets with a price to book value of  1.18 at offer price. The dividend payout rate is at 20% of the net profits.

You may buy this stock at the current price below offer price if you believe the management has the ability to maintain or expand profits and the business.

I do not have specialist knowledge regarding the shipping/lighterage industry, but knowing that the Philippines is an archipelago, ships are of great value, and Harbor Star is ahead by capitalizingon the stock market and servicing ports like Manila and Cebu.

QUARTERLY REPORTS

QUARTER              EQUITY (YTD)             REVENUES (Q)      NET INCOME (Q)         EPS (YTD)

2013 Q3                P 953,222,529            P 241,813,771         P 31,143,714               P 0.20