IPO to raise CYP 13 mln
Ocean Tankers Holdings pcl will be the first sea-going shipping company to list on the Cyprus Stock Exchange on November 11, after raising some CYP 13 mln through an initial public offering of shares to double the fleet from the present three to six or seven tankers.
Michael Ioannides, the Executive Chairman of Ocean Tankers Holdings (OTH), said that listing on the CSE will revive investor interest as shipping has the best returns in the market.
OTH will be the first seagoing tanker shipping company to list on the CSE and the Athens Stock Exchange (XA) after the common platform comes into effect next month.
“The stock is very promising as it is unrelated to local events, either in Cyprus or the area,” explained Ioannides, adding that this is an international business.
“About 90% of world trade is carried by ships and the cargo fees are 24 times less than any other freight,” he said.
As regards the risks, Ioannides explained that “for there to be a problem or crisis in the shipping industry, world trade has to stop altogether. Then everybody will have a problem.”
“We tried unsuccessfully to list on the CSE in 2000 (as LMZ Transoil) and they all ignored us. However, I was patient and have returned with Ocean Tankers Holdings,” Ioannides said.
OTH was established in June 2005 and owns three ships – the 7500-ton Maltese registered Timi built in 2005 and the 4500-ton Eleousa Trikoukiotissa, built in 2000, and the Cyprus-registered Victor Dubrovsky (Russian-built in 1997), the largest tanker in the fleet with 8055 deadweight capacity.
These are new-technology double-hull ships that will have greater demand in the US and European seas next year after the outright ban of single-hulls in these territories from January 2007 when chartering rates are expected to rise and the total phasing out from all markets by 2010.
“This means that with only 20% of all tankers at present being double-hull, there will be greater demand, which will automatically mean doubling our profits with very good returns,” Ioannides explained.
OTH will also benefit from the outsourcing of commercial management contracts by the affiliate Admibros Shipmanagement to V.Ships, the largest ship-management company in the world, and Prisco of Singapore.
“This will help minimise costs and achieve economies of scale,” explained the company’s vice president, Yiorgos Ioannides.
In only six months of operation, OTH reported USD 1.1 mln in pre-tax profits on a fleet worth USD 48.6 mln and with own funds of USD 22.4 mln.
“We are mostly active in the Mediterranean, Baltics and off the west African coast to help carry crude to short distances and shallow dredge ports,” he said.
— Follow the Greek example
Michael Ioannides quoted Greece’s former Prime Minister Constantinos Karamanlis as saying that “shipping is the national capital of every country.” With Greece commanding about 18% of the world merchant marine fleet, it generates some EUR 1.8 bln as the primary driving force of the economy, followed by tourism in second place with a contribution to the Greek economy of around EUR 10 bln.
“In Cyprus shipping is not mentioned anywhere in the state budget as a contributing source, and a few years ago it was not even included in the statistics,” he said.
“We have realized after dealing for 30-35 years in the shipping sector that Cyprus is still virgin territory for investments, with great horizons yet to be discovered.”
However, he sounded bitter that there is no maritime education, no lessons about shipping in schools.
“The colleges have started some programmes and this is commendable, but the University of Cyprus should, perhaps, start a Chair for Maritime Studies,” Ioannides said.
As a remedy he said his group of companies will be establishing a maritime academy to promote training and education about the shipping sector and will be looking forward to the fruition of efforts to create the Cyprus Chamber of Shipping. The group has also invested in the Cyprus Marine Club and is a founding member of the Cyprus Union of Shipowners.
“It is important to rebuild the relationship of the Cypriot public with the identity of the Cyprus flag, the Cyprus-owned ships and Cypriot management. Then we can be called a ‘traditional shipping nation’, while all this time we were labeled as a flag of convenience.”
As regards the Cyprus maritime sector in general, Ioannides said that the Open Registry helped Cyprus all these years that at one time reached the fourth place worldwide in the size of fleets.
“I am sorry to say that we have dropped to tenth and the strict regulations of the delisting of single-hull ships from the Cyprus flag was only part of the reason for this drop.”
— As simple as buying a house
As regards investing in a CSE stock after the exchange took a beating in the past five years, Michael Ioannides said this should be made simple for everyone to understand.
“Just like you buy a house, its that simple to buy a ship. If with today’s facilities you can secure some 80-90% funding through ship financing, that means that you only need to come up with 10-15% of the buying price of a USD 5 mln vessel, which translates to about USD 750,000, almost as much as its costs to buy a house these days. It’s that simple.”
There is no tax on profits and dividends from profits earned in shipping companies, which means that a 30% benefit is returned to the shareholder. Because of this we have lined up a number of reputable strategic investors, Ioannides said.
He said that the big gamble is that in the 5,000 to 10,000 dwt category the variability of chartering fees is stable and is expected to rise rapidly in 2007.
All ships were single-hull up to 1992-1993 when major environmental concerns forced the creation of double-hull ships. Some 70% of all vessels today are double hull, but this type of ships only represent 20% of the oil tanker sector, where OTH believes it will have an advantage.
“We are not in the spot market but in the futures, so our earnings are fixed and well in advance, which also means we know our revenue levels and profits in advance as well.
— Corporate Governance
Vice president Yiorgos Ioannides said that although the board comprises of four Ioannides family members and three unrelated parties, the company complies with the CSE and SEC corporate governance rules, as the independent persons head two of three management control committees.
The Ocean Tankers board of directors comprises of three executive officers — Michael Ioannides, President; George Ioannides, vice president; and Chryostomos Chrysostomou, director, and four non executive members – Daniel Ioannides, Antonis Ioannides, Michael Michael and Michael Philippou.
