Seaspan (SSW): Speculative income

"Seaspan Corp. (NYSE: SSW), a play in the shipping sector, is my largest personal holding," says Jack Adamo. In Insiders Plus he reviews the speculative income issue.

"Normalized earnings for the latest quarter were up 32%, but due to the greater number of shares outstanding, EPS were noticeably lower. 

"This is because the stock price has fallen substantially, due to industry fears. As a result, the company had to sell many more shares than usual to fund the delivery of new ships this year.

"The good news is the company says it has now arranged funding for all scheduled future ship deliveries.

"The stock also got hit on the news that two of its small lessees have asked for modifications on their long-term leases.

"One company represents less than 3% of Seaspan’s revenue; however, the other leases about 13% of Seaspan’s ships. That’s enough to dent results for a while, but not endanger the company.

"There’s no denying shipping is extremely tough now; so, concessions may have to be made at some point. But since 70% of Seaspan’s revenues come from shipping companies owned by The People’s Republic Of China, the vast majority of its revenue is virtually guaranteed.

"I think it will have a few weak years due to the incredibly weak world economy. But with its long-term charters with China and the biggest shippers in the world, I think it will come out fine, especially now that it has secured financing for future ship deliveries.The stock is a speculative buy for risk-tolerant income investors."