IPO Report: Diamond S Shipping Group (DSG)

Francis Gaskins  |

Diamond S Shipping Group (DSG) provides seaborne transportation of refined petroleum and other products in the international shipping markets and is headquartered in Greenwich, CT.

Four other companies are scheduled for the week of March 10, 2014. The IPO calendar is available at IPOpremium.

The manager and joint managers are Jefferies and BofA Merrill Lynch.  The co-managers are DnB Markets, HSBC Corporation, SEB Enskilda, Global Hunter Securities Co, Fearnley Securities and Stifel.  SEC Filings

DSG scheduled a $210 million IPO with a market capitalization of $710 million at a price range midpoint of $15 for Wednesday, March 12, 2014 on the NYSE.

DSG provides seaborne transportation of refined petroleum and other products in the international shipping markets.

DSG is one of the largest owners and operators of medium range, or MR, product tankers in the world.

DSG’s time charters (leased for over a year at a time) have attractive fixed base rates for the life of the charters, and 20 of its time charters provide for profit-sharing.


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Annualized Dec 9 mos

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Diamond S Shipping Group (DSG)







Teekay Tankers Ltd. (TNK)*







*mix of short- or medium-term fixed-rate time-charter contracts and spot tanker market trading

Nordic American Tanker Ltd (NAT)**







**Annualizing Sept 30–6 mos.  Depends mostly on spot rates








Over the last three months TNK and NAT stocks have been on an upswing.

Compared to TNK and NAT, DSG is slightly profitable while the others are losing money.  DSG is priced at a price-to-salespremium and doesn’t pay a dividend.

DSG expects to take delivery of 10 new ships between September 2014 and December 2015.

The stocks of both TNK and NAT have been in an upswing the past three months.

The current  rating on DSG is neutral to positive.

DSG provides seaborne transportation of refined petroleum and other products in the international shipping markets.

DSG is one of the largest owners and operators of medium range, or MR, product tankers in the world, according to Fearnley Consultants AS, or Fearnleys. DSG employs a chartering strategy for the majority of its fleet which positions it to benefit from a freight rate recovery while maintaining an attractive base level of cash flow regardless of market conditions due to the fixed monthly revenue DSG receives from its time charter agreements.

DSG’s current fleet consists of 33 MR product tankers built at leading Korean and Japanese shipyards.

All of DSG’s product tankers in its current fleet are on the water today, trading in the market and earning revenue.

Thirty of DSG’s MR product tankers are under time charters with the remaining three operating in the spot market.

DSG’s time charters have attractive fixed base rates for the life of the charters, and 20 of its time charters provide for profit-sharing.

The fixed base rates provide DSG with stable cash flow and limits its exposure to rate volatility while the profit-sharing provisions allows it to share in the charterer’s voyage profits when spot rates, on a time charter equivalent basis, are higher than the base charter rates and DSG’s charterers are able to earn voyage profits in excess of that base charter on an annual basis.

DSG does business with large, well-established charterers such as GlencoreXstrata, Trafigura Beheer BV, or Trafigura, A.P. Moller-Maersk A/S, or Maersk, and Tesoro Corporation, or Tesoro, Shell Tankers Singapore Ltd., or Shell, and Stena Weco A/S, or Stena, and their respective affiliates.

As of December 31, 2013, the average remaining charter length of DSG’s current fleet was two years

Growth plan
DSG believes that there are significant growth opportunities to pursue in the current market environment, as asset values remain significantly below their historical averages and the product tanker market remains highly fragmented.

As part of DSG’s growth strategy, DSG recently acquired three additional tankers from CarVal, an investment arm of Cargill, Incorporated.

DSG plans to further expand its  fleet, in part from the proceeds of this offering, through the purchase of ten newbuild product tankers from a Korean shipyard that have contractual delivery dates between September 2014 and December 2015.

Because the majority of the current fleet is employed under time charters, DSG will consider installing any new technologies when the vessels trade in the spot market, are re-contracted or undergo scheduled drydocking.

The leading industry consulting firm believes the entire medium range fleel will grow 4% annually between 2014 and 2016.

DSG operates its vessels in markets that have historically exhibited seasonal variations in demand and, as a result, in charter hire rates.

The product tanker market is typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere.

In addition, unpredictable weather patterns in the fall and winter tend to disrupt vessel scheduling and supplies of certain petroleum products.

The oil price volatility resulting from these factors has historically led to increased oil trading in the winter months.

DSG could experience difficultly re-chartering its time charters that expire during the relatively weaker fiscal quarters ending June 30 and September 30 at similar rates or at all, which would adversely impact its business, financial condition and operating results.

Dividend Policy
No dividends are planned

DSG operates in markets that are highly competitive and based primarily on supply and demand. DSG competes for charters on the basis of price, vessel location, size, age and condition of the vessel, as well as on its reputation and that of its Manager.

DSG competes primarily with other independent tanker vessel owners and with major oil companies that own and operate their own vessels.

DSG’s competitors may have more resources than DSG and may operate vessels that are newer, and therefore more attractive to charterers, than DSG’s vessels.

Ownership of tanker vessels is highly fragmented and is divided among publicly listed companies, state-controlled owners and private shipowners.

5% stockholders
WL Ross Group, L.P.​32.2%
First Reserve Management, L.P.​27.2%
CarVal Investors, LLC 18.3%
Chengdong Investment Corporation 8.6%

Use of proceeds
DSG expects to net $193.1 million from its IPO. Proceeds are allocated as follows:

to fund up to $190 million of the purchase price for ten newbuild product tankers being built by a Korean shipyard, with any remaining proceeds being used for other acquisition expenses and general corporate purposes.


DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.


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PTCDF PT Ciputra Development (Indonesia) n/a n/a n/a 0



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