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| | Overseas Shipholding Group Inc
Description of the Business
Overseas Shipholding Group, Inc (OSG) is engaged primarily in the transportation of crude oil and petroleum products. OSG operated a fleet of 122 vessels and its newbuilding program totals 32 vessels.
Analysis of Competitors
The main competitors of Graco are:
- Frontline
- Seacor
- Teekay
- Nordic American Tanker Shipping Limited
- Dampskibsselskabet Torm A/S
- Tsakos Energy Navigation
- General Maritime
- Nordic American Tanker (no debt)
Competitive Advantages
OSG is one of the bigger companies engaged in the water transportation of crude oil. This industry is highly cyclical and the fixed costs (fleet) are huge. As a result the industry is highly competitive and it is very difficult to achieve a competitive advantage. A competitive advantage could be a strong balance sheet which provides the opportunity to buy other companies at low prices during a crisis.
Because of the the competive nature of the industry it is not possible to achieve sustainably a ROE of more than 10%.
Financial Analysis
OSG uses about 55% of debt to finance its fleet. This is an average level of leverage. OSG has been very profitable with an ROE of about 20%, but this is not sustainable.
Risks
Their main risk is that rates could drop significantly because of over capacity. Because of the high fixed costs shippers are forced to continue to operate making losses.
Valuation Calculation
Their future cash flow value is $60 based on a 10% return on equity.
The total value of OSG is $60 a share.
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