If I have USD 100 million to invest, which maritime sector should I invest in ?

• Main Author: Ye, Zhongyu
• Other Authors: Kenneth Tan
• Format: Final Year Project
• Language: English
• Published: 2016
• Subjects: DRNTU::Engineering
• Online Access: http://hdl.handle.net/10356/67870
• Institution: Nanyang Technological University

Investing in the shipping industry used to yield exceptionally high returns in the past years which allures more investors throwing in money. However, the too drastic change in the market condition in the recent years has made investor ponder whether it is still a good option if with USD 100 Million in had. This paper therefore provides an insight into how to invest in the dry bulk sector with the amount provided. Although theory establishes that shipping market is cyclical, recent fluctuations and volatility have proven the market has gone wilder. Many existing dry bulk shipowners have experienced persistent greats losses in the past five years. It makes future investors to be more discreet and cautious as to when, what and how to invest. In order to provide a sensible recommendation, an analysis of the current market condition which includes demand and supply factors of the dry bulk market. Informational interviews were conducted with four professional experts in the dry bulk sector which valuable ideas are obtained. These interviews provide a basic direction to the investment plan: 1) Smaller size vessels are preferred 2) Japanese built vessels are of better quality. Investment outlook are evaluated based on the top three factors extracted from survey that would influence investment decision. Three investment scenario are formulated after the outlook analysis using Discounted Cash Flow method for which NPV is calculated for each scenario. Newbuild and 5-year secondhand Japanese built Handysize and Handymax vessels are used for calculation. Projections of future freight rates and operating expenses are based on Clarkson and Moore Stephen historical data. Recommendation is drawn from the result of DCF analysis which shows clear better performance of 5-year second hand vessel with investment approach 2: buy and time charter out. Investing in dry bulk market is for adventurous investors with high risk appetite. Gambling in the dry bulk market gives high risk and high return if properly played. The final recommendation is given to investors that are willing to take a bet in the industry. For investors that seek stable and steady returns, USD 100 Million is therefore not recommended to invest in dry bulk market.