Justin B. Yagerman J.P. Morgan Asset Management Global Maritime and Transport

Transcription

1 CHARTING THE COURSE: Maritime s role in institutional portfolios Justin B. Yagerman J.P. Morgan Asset Management Global Maritime and Transport

2 FROM THE LOOKOUT: GLOBAL MARITIME Workhorse of the Global Economy Market Liquidity & Transparency Long-Life Assets Inflation Protection Diversification Attractive Income U.S. Dollar Denominated 1

3 WORKHORSE OF THE GLOBAL ECONOMY Retailer Grain Exporter Refinery Fuel Retailer Refined Product & Crude Steel Mill Manufacturing Plant Retailer Steel Mill Food Producer Steel Mill GLOBAL TRADE ROUTES Bulkers Fuel Tankers Containerships Source: J.P. Morgan Asset Management ( JPMAM ), Clarksons, as of June

4 DRY BULK: BACKBONE OF GLOBAL INFRASTRUCTURE One Capesize bulker carries ~180,000 dwt of coal. That s enough to fill over 1,700 rail cars which, if lined end-to-end, would cover almost 18 miles. Food Producer Grain Exporter Steel Mill Steel Mill Steel Mill GLOBAL TRADE ROUTES Bulkers Source: J.P. Morgan Asset Management ( JPMAM ), Clarksons, as of June

5 TANKER: FLOATING PIPELINES Refinery Fuel One Very Large Crude Carrier ( VLCC ) can carry upwards of 2mm barrels of crude oil. That s enough to refine 38mm gallons of gasoline or 10% of the US daily consumption. Refined Product & Crude Fuel Fuel GLOBAL TRADE ROUTES Tankers Source: J.P. Morgan Asset Management ( JPMAM ), Clarksons, as of June

6 CONTAINERSHIP: KEY LINK IN GLOBAL LOGISTICS Retailer Retailer The largest ULCS, or Ultra Large Containership (today), can carry approximately 20,000 intermodal containers that s enough capacity to move over 2.6mm refrigerators, or over 16.7mm 42 flat screen TVs Steel Mill Manufacturing Plant Retailer GLOBAL TRADE ROUTES Containerships Source: J.P. Morgan Asset Management ( JPMAM ), Clarksons, as of June

7 Yield-Oriented DEALS ACROSS THE RISK/RETURN SPECTRUM Opportunistic Aircraft Acquire new, narrow-body aircraft with inplace long-term charter to a major airline LNG Carrier Acquire LNG Carrier with an in-place 15- year charter to an energy major Intermodal Containers Acquire Container fleet and employ on long-term lease with liner company Ultra-Large Vessel Acquire Capesize Bulker, VLCC, or ULCS and employ on long-term charters with quality counterparties Offshore Supply Vessels Acquire PSV, AHTS or CSV and place on medium-term charters with an energy major Medium-Sized Vessel Acquire Product Tanker, Containership, or Bulker and place on short- to mediumterm charters Short-Term Charter Strategy Source: JPMAM, as of June These examples are of representative investments and is shown for illustrated purposes only. However, you should not assume that these types of investments will be available to or, if available, will be selected for investment in the future. There can be no guarantee of future success. Note: LNG = Liquefied Natural Gas Carrier; VLCC = Very Large Crude Carrier; ULCS = Ultra Large Container Ship; PSV = Platform Supply Vessel; AHTS = Anchor Handling Tug Supply Vessel; CSV = Construction Support Vessel 6 Acquire modern, sub-panamax second generation Containership and charter in spot market Acquire Handysize Bulker and charter in spot market

8 ANATOMY OF A YIELD-FOCUSED APPROACH Sector Selection Asset Selection Counterparty Selection Manage Lease Duration Manage to Sale Consider revenue drivers to determine sector weighting Consider quality of asset under consideration Consider end-user credit quality Consider employment duration and stagger lease expiries Determine accretive exit strategy and execute transaction Drybulk: Infrastructure development, construction and urbanization Tanker: Global energy, heating and transportation demand Containership: Demand for consumer products and manufactured goods LPG Carrier: Transport, heating, and cooking needs Car Carrier: Automobile demand, construction activity Offshore: Oil & gas exploration, production, and distribution LNG Carrier: Proliferation of natural gas infrastructure Intermodal: Containerized trade, global GDP Aircraft: Passenger and air cargo volumes Source: JPMAM, as of July Notes below each sector image illustrate sample demand drivers. 7 Rail Car: Downstream (i.e. agriculture, mining, energy) and passenger volumes

9 Vessel / Asset Type Sector Selection ANATOMY OF A YIELD-FOCUSED APPROACH Asset Selection Counterparty Selection Manage Lease Duration Manage to Sale Consider revenue drivers to determine sector weighting Consider quality of asset under consideration Consider end-user credit quality Consider employment duration and stagger lease expiries Determine accretive exit strategy and execute transaction Sample Counterparty Exposure Weightings Energy Major: 30% Container shipping and logistics: 10% Mining Company: 30% Automotive shipping and logistics: 30% Energy Major Energy Major Energy Major Contracted Employment Crude Tanker 5-Yr Exxon Charter 1-Yr Option Containership 7-Yr Maersk Charter 1-Yr Option Aircraft 8-Yr British Airways Lease 2-Yr Option Car Carrier 10-Yr K-Line Charter 1-Yr Option 1-Yr Option LNG Carrier 15-Yr Cheniere Charter Year Source: JPMAM, as of July

10 Sector Selection ANATOMY OF A YIELD-FOCUSED APPROACH Asset Selection Counterparty Selection Manage Lease Duration Manage to Sale Consider revenue drivers to determine sector weighting Consider quality of asset under consideration Consider end-user credit quality Consider employment duration and stagger lease expiries Determine accretive exit strategy and execute transaction Sales & Purchase Market Public Market Sale to Counterparty at Lease Expiration If Joint Venture, Sale to Partner Sale to Strategic Buyer Direct Sale to Institutional Investors Initial Public Offering Source: JPMAM, as of July

11 Representative Transaction Vessel Type: LNG Carrier Newbuild Yard: Korea Charter Period: 10-Years Charter Rate: $80,000/day Counterparty: Shell Entry Price: $205m (2017 Delivery) Exit Price: $150.4m Deal Yield Metrics Unlevered Yield: 10.5% Unlevered IRR: 8.7% ATTRACTIVE YIELD POTENTIAL Shell Fixed Income Summary Moody's Outlook Issuer Rating Long Term Rating Senior Unsecured Debt Standard & Poor's Reference Shell Bond for Comparison Price: Principal: $1,081m Coupon: 2.50% Maturity: 3/24/2026 Bond Yield Metrics Current YTW: 1.7% NEG Aa1 Aa1 Aa1 LT Foreign Issuer Credit AA - LT Local Issuer Credit AA bps Yield-Premium Source: JPMAM, Clarksons, Bloomberg & CapitalIQ, as of July All case studies are shown for illustrative purposes only and should not be relied upon as advice or interpreted as a recommendation. They are based on current market conditions that constitute our judgment and are subject to change. Results shown are not meant to be representative of actual investment results. Past performance is not necessarily indicative of the likely future performance of an investment. 10

12 CHECKING ALL THE BOXES Maritime assets can be, and should be, part of a diversified portfolio, given the attractive investment characteristics of the asset class Essential nature High return potential Attractive historical returns Long-term cash flow visibility Diversification to Financial Other real assets assets Inflation sensitivity Complementary strategy Maritime assets 11