First with Financial Comment from Arabia

Qship to take advantage of global crisis to buy cheap vessels

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The response of Qship to the global financial crisis has been a model of good governance, and heartening to the many nationals and expatriates who own stock in this newly merged company. Shares are up 65 per cent from a low in February.

First, there was an extremely astute decision to sell half of its fleet before the economic crisis. The last ship was sold in January 2008 and the same vessel could now be bought for half the price.

Crisis merger

Secondly, there was the merger. In November 2008 the government ordered the merger of Qatar Shipping and Qatar Navigation to form one company to weather the global financial storm that proved to be particularly devastating for shipping interests.

Third, having sold ships at the top of the market Qship is now looking at buying vessels at the bottom. Yesterday CEO K.K.Kothari told Reuters that the group was poised to acquire ships in 2010.

He said any purchases would be funded through internal resources and bank loans. Qships presently has seven ships transporting crude oil, petrochemicals and LPG.

Kothari indicated that Qship would also be interested in acquiring other shipping groups as some ‘ship-owning groups are nor fulfilling their loan covenants’. This smacks of great market timing, something that is absolutely essential in an industry as cyclical as shipping, especially in a once-in-a-generation tidal wave.

Capital management

You need to be part fund manager, part world-wise trader to get shipping right. Another example of Qship’s astute recent trading was the $110 million sale of its subsidiary Qatar Engineering and Construction last September before the global financial crash, a company that it had bought for $11 million five years earlier.

It is not clear if this sale contributed to the marginal growth in nine month profits to $142 million. But achieving such a profit through this appalling period for global shipping stands out from the crowd.

If the Qatar sovereign wealth fund is also turning heads with its clever deals, that are more like a hedge fund than a state-owned concern, then Qships deserves credit for its record over the past year, and is certainly a company to watch in future.


Written by Peter Cooper

November 17, 2009 at 10:05 am

Posted in Banking, Qatar

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