Watchlist #2 - A beaten-down shipping conglomerate trading at 0.3x NAV
Deep-value assets in tankers, bulkers, and containers meet entrenched control and macro tailwinds.
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I do not own units of the analyzed company at the time of writing and may buy or sell units at any time without notice.
My fellow investors,
My son just turned two and each day he discovers a new way to test his physical limits. Recently, one of his favorite activities has been climbing on our stone hearth and jumping off onto the slippery hardwood floor.
We’ve installed ample padding to the stone and do our best to let him explore and build confidence while hopefully avoiding a head injury. He’s actually gotten pretty good at it, though I sometimes still have a hard time watching without intervening.
The stock I’m analyzing today feels a bit like my son’s blind adventurism is wearing off on me. The company is a shipping conglomerate that trades at ~0.3x the NAV of its vessels. Before you jump straight to the conclusion that buying any dollar for thirty cents is a good idea, there are sound arguments for why the company trades at such a discount to liquidation value.
Shipping is a deeply cyclical, capital-intensive industry where mistakes can linger for decades. Once a segment becomes overbuilt, it takes many years to unwind, as vessels often have useful lives of 20–30 years.
Also, haven’t you heard about tariffs? Deglobalization? The impending recession? Shipping certainly doesn’t “feel” like the place to be right now.
This particular company adds another layer of complexity. It’s a conglomerate, which already tends to trade at a discount to focused peers. More importantly, it has a long history of centralized control and controversial capital allocation decisions that have left investors skeptical of whether asset value will ever be realized for minority unitholders. That skepticism shows up in the valuation.
To make matters more interesting, the balance sheet is levered, and operating profits have declined from post-COVID highs.
What do I see? There are three macro forces—one each within tankers, bulkers, and containers—that could act as catalysts. Whether those forces translate into value for unitholders, or simply reinforce the existing discount, is less clear to me.
If you’re a thrill seeker like my toddler, this is a stock where you might stick the landing and feel super proud of yourself, or misjudge the risk and learn (painfully) why Dada had to install padding in the first place.