Market Value vs Book Value

The National Shipping Corporation of Saudi Arabia (NSCSA)

Financial Appraisal

In the shipping industry, any appraisal of the target company will require an inspection of the ships and an audit and review of its risk management, planned maintenance and safety and quality systems. However, for the purpose of this study it is important to point out the fact that no ship inspection was carried out to determine the conditions of the ships. It is assumed that the ships in the fleet confirm to the acceptable standards of operations, and there is comprehensive risk management, planned maintenance and safety and quality procedures and systems in place both at the office and the ships.

The marine industry is also increasingly legislated and regulated by numerous governments, port and flag state authorities, classification societies, seafarer’s unions and other international bodies due to concerns over issues of ship safety, marine pollution, crew welfare etc.

Company Overview

Established in 1979, The National Shipping Corporation of Saudi Arabia (NSCSA) is in the business of marine transport.

The company owns and operates a fleet of VLCC’s (Very Large Crude Carriers) and container ships, and further owns thru joint ventures with other companies a fleet of petrochemical tankers and LPG Carriers.

The company has made further investments by acquiring a minority stake of 30.30% in Petredec Limited, which owns and operates 40 tankers.

Oil and gas transport is a major source of the company’s revenue and income, contributing 69% to the operating profit. Of the 9 Very Large Crude Carriers (VLCC’s) deployed in this trade, 5 vessel’s are fixed on long term time charter of 5 years. The remaining 4 vessel’s operate in the spot market.

The revenues of the company has increased by 36% over 5 years representing a simple growth rate of 7% per year. The operating revenues are derived by a mix of charter hire by signing long term charter hire agreements as well as...