Venice Shipping e Logistics, a well known advisory company focused on the shipping and logistics sector in Italy, made some simulations for BeBeez which gave birth to the Vsl Shipping Equity Index, using market forecast provided by Clarkson Research Services.
Since now Vsl has provided yield simulations as for investments in a Handy Tanker second hand 5 years old and in a Supramax Bulk second hand 5 years old (see here September Vsl Shipping Equity Index); and yield simulations as for investments in a Medium Range Tanker second hand 5 years old and in a Handy Bulk second hand 5 years old (see here June Vsl Shipping Equity Index).
In a positive scenario for shipping freight rates, if you invest today in a Handy Tanker ship and think to divest in a 3 years’ time you can get a 7.37% Irr if you leverage your deal or 6.13% Irr in an unleveraged deal. However, in the worst case (i.e. freights go 10% down), you can suffer a negative 12% yield per year in a leveraged deal or limit your loss to 3.86% each year in an unleveraged deal.
In a 5 years’ perspective the loss risk is smaller (i.e. 7.26% in the wrost case with the leverage) still having an interesting potential gain of 7.3% per year in the best case.
The same exercise made for an investment in a Supramax Bulk ship brings to positive yields in line with the ones from an Handy Tanker, while the potential losses are much more limited. Actually you can get about 11.6% each year for 3 years in the best scenario with leverage or loose 7.48% each yeat in wrost case with leverage. The potential loss is instead limited to 4.95% per year if you have a 5 years’ perspective.
As for an investment in a Medium Range Tanker ship, the best scenario might give you an Irr higher than 11.25% in 3 years with leverage or 8.25% without leverage. In the base case instead (i.e. freights stay around 14k dollars per day) the forecast is jus a 2.4% Irr. The wrost case brings finally to a 7.4% negative yield in a leveraged deal or -1.4% in an unleveraged deal. The 5 years perspective limits potential losses to 2.9% in the wrost case with leverage and gives you the chance to gain more than 10% per year in the best case with leverage.
The same exercise made as for an investment in a Handy Bulk ship brings to positive yield much smaller than that in a Medium range Tanker while potential losses are rather higher, especially in a 3 years’ perspective.