The Great Eastern Shipping Company Limited (500620) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to The Great Eastern Shipping Company Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shivakumar, Executive Director and CFO. Thank you, and over to you, sir.

Thank you, Yashashvi. Good afternoon, everyone, and welcome to the conference call to go through Great Eastern Shipping's results for the third quarter and for the 9 months of FY '26. I have with me Rahul Sheth. We will go through a presentation quickly first, and then we'll be happy to take questions. I will run through the presentation quickly. I'm sure you all would have seen it, it was uploaded yesterday, so that we can have maximum time for Q&A. You would have seen the financial highlights. We had a net profit of INR 813 crores on a consolidated basis, standalone INR 650 crores. The net asset value has gone up again. And this has mainly gone up because of the operating earnings. There's been no significant change in values of ships between September end and December end. So this is all operating cash flows which have helped to improve the net asset value. And we have yet again declared a dividend. This is the 16th consecutive quarterly dividend that we are declaring. I won't go too much into the P&L. You would have seen this. We can go through it later if you have any questions. On a normalized basis, we have -- it's not too different from the reported numbers. Just to remind you, this is to take out the effect of the exchange rates and the derivatives that we do, and the derivatives are basically for converting our rupee debt into dollar debt, so that we match our debt and our assets. Return ratios continue to be good. As I mentioned, NAV has gone up in the quarter, and it has gone up in the 9 and 12 months as well. This is the industry format basically for shipping analysts. It helps to know what were the voyage expenses, and therefore, what is the time charter equivalent rate because voyage expenses or what are called direct operating expenses are a pass-through part of executing the voyage. We start our discussions from what is here marked as A, which is time charter equivalent. So when we talk of dollars per day, that is at this level, that is the time charter equivalent level. Business overview. There are a lot of details here. Basically, the headline news is OPEC opened the taps again, which meant that there was more cargo to be carried around, more crude cargoes to be carried around. And this was known before because they had a schedule which was laid out. On the -- apart from OPEC, which was a move which was known since the middle of last year, there was also South America, which produced a lot of oil. Guyana and Brazil produced about 1 million barrels a day more than in the same period last year. I'm talking of Q3 FY '26 versus Q3 FY '25. This oil is not necessarily getting consumed. It's going into inventory. Some of it is in floating storage as well, while it looks for a buyer. But the net effect is that markets were strong. Crude tanker markets were strong. Product tanker markets also recovered in the quarter from where they were the previous couple of quarters. Asset prices were about 5% up. But when you adjust for age, et cetera, it's not too different. The order book is currently -- has been creeping up as the markets continue to be strong and ship prices have been strong as well. So the order book for crude tankers is currently at about 17% for crude and 19% for product tankers. Coming to dry bulk. Again, this is a sector which saw some strength especially in the Capesize sector. This sector has also continued to be strong in January. We had a small dip and then it's picked up steam again, which is unusual, because seasonally, this is the worst quarter of the year, but markets have been reasonably strong for the last week or 2. Again, iron ore trade did see substantial growth in Q3, about 40 million more of imports into China. Again, there is -- a lot of it is going into inventory at ports in China. So there seems to be some stocking up. Also, grain trade grew in Q3. And so bulk carrier asset prices were marginally higher during the quarter. And the order book is at around 12.5%. LPG spot earnings were strong. Trade volumes were down. However, ton miles helped a little bit because U.S. exports were going to Southeast Asia instead of going to China through the Panama Canal, which means more miles. So earnings were pretty strong. Asset prices were flat, but at very high levels. The order book continues to be very high at 29%. I've already spoken about the asset price movement. The order book also I've mentioned. Again, it's creeping up. It was very low in 2023, 2024 for the crude and product tanker sectors. It has now gone up significantly since then, still at pretty low levels compared to what it has been in previous highs. And just to compare the order book with the old fleet, you can see the orange bar is the -- what we would define as the old fleet, which is 20% plus for all categories except LPG and LPG reached 25% plus. So in LPG, only 11% of the fleet is old, but there is -- the order book is 29%. In dry bulk and product tankers, they are more or less even, the old fleet and the order book. In crude tankers, the order book is at 16% to 17%, while the old fleet is 24% of the fleet. Scrapping has been very minimal for the last 10 years. So we are talking of only about between 8% and 12% of the fleet getting scrapped in an entire 10-year period, which is very low. And that is a scrapping overhang which is there in the market, which is why you have such a high proportion of old fleet. Coming to the jackup market. This is the international market scenario. Markets are showing some recovery. Saudi Aramco has come back into the market. 2 years ago -- almost 2 years ago, they had off-hired about 24 or 25 jackup rigs or they had suspended contracts for those rigs. A lot of those are going back -- are being called back by Saudi Aramco. And that again is starting to tighten the market a little bit. And this is a slide of course of how many old rigs are there in the market, old rigs and old vessels. And the order book is extremely low because very few assets have been ordered in the last 10 years. For Greatship, because that's predominantly a time charter business, these are the repricings. We have one rig which is on a short-term contract in India itself. As it stands, her contract gets over in end of February. So we will need to find work for her. We are in discussions and bidding for contracts. The second rig, which is also on a short-term contract, comes off contract sometime in May, June, and we will see what to do about the future business for her. The vessels, there's only one which is up for pricing in this quarter and there are 4 which are up for pricing in the next quarter. So we have a lot of coverage for the vessels. This is on the breakup on the revenue days and the TCYs. I won't go too much into it. The net asset value, the growth over the last 5 years. We've seen this going up with a CAGR of 20% plus on both the standalone and the consolidated basis. And just to look at what happened between December '24 and December '25, you will see that the net asset value has actually gone up even though we have paid out a dividend. You can see the fleet value reduction is INR 44 per share, and we paid out INR 28 per share in this period. However, the NAV has gone up, and that's because of the green bar, which is the cash profit, which is being produced. I've mentioned in the past that the net asset value converts into cash and that helps to cushion it from a fall in the asset prices. Similarly for the consolidated NAV as well. Again, the stock price to consolidated net asset value, we are trading at about a 25% to 30% discount currently. Again, showing that we focus on timing the market. Last time we levered up in FY '17, '18 and '19 from 0 net leverage. In the shipping business, we went up to $360 million of net leverage. And we've been net cash ever since middle of FY '23, and now we have more than $500 million plus net cash. I won't go through these details. These are the governance details and what we are doing on CSR and ESG. So that brings me to the end of the presentation, and we are happy to take questions now.

[Operator Instructions] We'll take our first question from [ Deven Sangoi from Tej Investments ] Sorry, since there is no response, we'll move on to the next question from Rahil Dasani from MAPL.

First of all, congratulations on a good set of numbers. My list of questions was more around our offshore vessel segment, particularly. I wanted to understand if you can share more about the OSV charter rate cycle that we are in right now. The understanding that I am getting is that there is a demand-supply gap and the shipbuilding is low as well as the age of vessels in use already is high, which is even deepening that gap. So if you can explain where are we in this cycle currently?

Yes. Okay. So I'll have to just give you a bit of background to this space. So if you look at the offshore vessel sector, there are large number of ships. We have about 3,000-odd ships. There are 500, 700 ships in what we call cold layup. So they've not been operated for a long time, because as you know, the offshore space had gone through a downturn. These vessels, we don't count as part of the operational fleet because they will have -- someone will have to spend a lot of money to get them back into operations. As of today, we've seen no movement on that. When you remove those ships from the fleet supply, we then calculate what is the utilization of the industry. The utilization of the ships currently are at about 65%, 66%. It's called marketed utilization. Now while that in an absolute terms may seem a bit low, for our industry, that's actually quite good. It doesn't mean that ships are not being used. But what happens is that offshore vessels are generally fixed for long-term contracts. And therefore, between contracts, there is a gap, right, while business is being negotiated or vessels are in dry dock being serviced. Also, in this business, there are many pockets of the market. So unlike mainline shipping, the ships don't necessarily always move from one market to the other all the time because there is a cost of positioning. So 65% is generally relatively healthy. The highest we have ever seen, and this goes back before 2015, probably 2012, 2014 when the markets were the strongest, the utilization number would have been closer to maybe 70%, 72%, something like that, right? So if you look at it from where we have been at the peak levels, that's actually relatively on the higher side. Secondly, we have also seen -- we have seen some -- a small amount of ordering that's taken place in the last couple of years. But on an overall fleet, it's still very small. Technically, when you look at the order book, there is a published order book that has been there, but it's been there for a very long period of time. And those ships have not really gotten delivered. So we assume that sometimes what happens is people had ordered ships, but then the market had turned, people probably could not afford to take delivery of those ships. So they are lying there somewhere. Many of these are orders sitting in China. So it's quite opaque to know what's happening to those ships, whether those ships really exist. And as you can imagine, no shipowners are really going to touch a ship probably lying half built somewhere 5 years later, right? Again, you need to be very confident in the market to spend that money to take for delivery. So even the order book is very, very low. And because the order book is very low and has been low for the last multiple years, even the fleet age has crept up over the period of time. So from a supply perspective, it is relatively constrained. We don't know what will happen on those 500-odd ships which are in cold storage. Like I said, they're unlikely to come back. Also, they will be relatively old. And as of now, the demand is holding up, so the utilization levels are quite strong, and that's reflected in the earnings.

Got it. And if I were to just get more specific on this, post '21, 2022, we saw charter rates doubling. Is that sort of growth still continuing or has it slowed down or even we are seeing a dip in growth somewhat in the charter rates?

No. So see, firstly, just to clarify on that growth, the charter rates were very low for a long period of time, right, generating -- you would have seen it in the results of Greatship. But over the last -- so that doubling happens because the base was so low, okay? Now from these levels, it's not like as if these rates we can keep saying that, okay, they've doubled over 5 years, so they'll double again and double again, that's not going to happen. The numbers will be astronomical. All I can tell you is that over the last calendar year, about 1 year, 1.5 years at least since the rates have gone up a lot, they have broadly held up at these levels, and we've seen no dip. Again, pockets of the market reduce a bit, a little bit in utilization here and there, but broad story, they've held up.

Got it. That's very clear. Sir, last one question before I get back to the queue. ONGC, Reliance and Cairn have a lot of incoming projects. For example, ONGC has planned 10 development wells as well as the PRP-9 project. Reliance has the KG-D6 Block plus the general offshore wind and the port construction demand. So what sort of offshore vessels demand are we seeing across our set of vessels like the PSV, MPV, OSV? If you can quantify it in number of vessels that we can expect from these few pockets of demand?

So firstly, offshore wind, there's not much activity here. Secondly, on all these other oil projects, you have to remember that it takes a lot of time to develop all these projects out. Even we do not have any knowledge of how many more additional vessels will come up. All we can say is that the market is relatively well balanced. And how it pans out over the next few years, frankly is anyone's guess. You have to remember, even when they start drilling and when they start looking at these fields, a lot of the oil companies have to see how those fields develop, what potentials they see, how much money they're willing to put in. I don't think those companies will also be in a position to give you a firm number of how many more additional ships will be required.

Got it. And just to get a more general understanding, for example, the KG-D6 Block of Reliance came in 2024. So how long does it usually take for the demand for our sort of vessels to come in?

We'll not be able to comment on how -- on that. We won't have sufficient knowledge to comment on this.

We'll take our next question from [ Rajakumar Vaidyanathan from RK Invest ]

I have 2 questions. The first question is for Shiv. I'm looking at your Slide 7, where you've given this return on the capital employed and so on and so forth. So just allow me just to give me 2 minutes to explain the question. So Shiv, if I look at your 3 drivers of your bottom line or the profitability, they are your core freight earnings, profit on sale of ships and then your other income comprising of your interest income and then the FX gains, right?

Yes.

So for a moment, if I back out your profit on sale of ships and the other income as well as the FX gain, so your PBT comes to approximately INR 520 crores for the quarter as against whatever INR 840 crores you have reported. So if I take that as the numerator and then I'm using your equity as your replacement cost because you're giving the number based on the book value, which is INR 1,000 approx. So if you have to replace that to a NAV of [ INR 1,566 ], which is working out of almost INR 22,000 crores. So if I annualize, you guys are close to -- you're making around 10% pretax return.

Yes. See, the only thing is in the INR 22,000 crores then you'll have -- sorry, are you done with your question?

Sorry, let me just -- just one more minute.

Yes, please go ahead.

This is one part. So I'm looking at this way. Second thing, I know all your segments are firing well, crude, dry bulk, gas, all the freight earnings are doing really well based on whatever you have put out. So even in this scenario, if you guys are making only 10% return on the -- whatever the replacement cost basis, that is my thing. And my only worry is if all these tailwinds that you have in terms of better asset market compared to your book values, then the rupee depreciation. Currently, it is a tailwind for you because you are holding more cash than loan. If that were to kind of negate because rupee has already depreciated quite a bit. So you may not have this tailwind go forward. So the question is, are we -- have we seen the best of earnings for Greatship as of now unless you guys really do something about the business in terms of acquiring more ships and also your -- depending on your -- the freight market. That's my question.

So a couple of things. So first of all, one adjustment I would make to the -- fundamentally, I don't have a disagreement with the way you have approached it. The first -- but I would make one adjustment there. If you have taken out the other income, then you have to take out what results in other income, right? What you're trying to find out is how much...

Yes, yes. I did that also. So basically, I removed the cash because I didn't have the cash number. Now that you told it's about $500 million, so it's about INR 4,500 crores. So if I back that out, your denominator is about INR 18,000 crores. So even then your pretax is about 11%. From then it moved to broadly 11%.

On a consolidated basis, we have INR 7,000 crores of -- sorry, of net cash which has to be taken out of there, which is INR 500 on the NAV. So we're talking about INR 15,000 crores. Again, here and there, we can have 1% or 2%. We are talking of INR 15,000 crores, which is the market value of the sort of business, okay, which is about where it is. It's about INR 14,000 crores if you just take the fleet values of shipping and offshore. And so what we are seeing is that you are making and the number you put, let's just say that we annualize the INR 500 crores, which is about INR 2,000 crores. And you're somewhere -- it's not 10%, it maybe 12%, 13%, okay? But yes, it is true because the prices are so high, you're not going to make a current yield on those -- on the current high prices, which is also the reason why we are not investing today. If we were making significantly more current yield on the ships at today's prices, we would be looking at investing more. So the point you made is correct, and it's also showing why we are not really that keen to invest at today's prices. What can also happen, of course, is that INR 15,000 crores can drop off. If the market drops, that market value of that fleet can drop off. But yes, cash is a drag on the returns. And now let's look at the whole thing, right, including the cash. So you look at INR 800 crores on the INR 22,000 crores number. And that is now bringing you closer to something which is not a very great return, which is being dragged down by cash. Eventually, we hope that this cash will go from earning 3% in dollars, which is what we earn, to earning -- to a ship which earns more than 10% in dollars. And that's what we are waiting for. We're waiting for that opportunity. And yes, it is not a great situation to have so much of our balance sheet in cash, but hopefully, it's temporary.

Okay. So in terms of the drivers -- so I mean, I'm just laboring on the same question, Shiv, sorry about that.

No problem.

So I think since the rupee depreciation is almost kind of close to its peak, so it would be kind of pertinent that you folks look at the cash, deploying the cash quickly so that the return ratios don't fall further. And again, it again depends on your core earnings as well because given the volatile markets, the shipping market is doing well today. So if the markets have to turn some reason, things stabilize, which everyone is hoping for, I mean, everyone wants other way. So -- but what I'm saying is you will lose all the tailwinds that you have currently today, all the 3 levers which is firing for you today, if all of them have to turn down, then it will kind of suppress the earnings going forward. So that's my only humble submission.

Yes, yes. See, on a current yield, ships make a decent return. So if we buy a ship today and earn today's earning at today's freight rates, you will probably make a 10% return on that dollar invested. The worry is that 5 years ago, before this market went up, especially for the tankers, the ship -- equivalent ship value was 40% to 50% below where it is today. Now the question is whether you risk that drop in the asset price in the hope of making this 10% in currently. That's the approach. That's the thing that we have decided that we'll not do. So in fact, we tend to buy when the current yield is very poor because that is what gives you the capital appreciation later on. When the markets are weak, earnings are weak. You will remember that in 2018, '19, we actually declared a loss. And that was because we bought ships when the market was very low, and we went out and bought even more. We levered up and bought. So while it is tempting to convert some cash into an asset which is earning 10% plus return, that's not something that we are looking to do currently.

Yes. So Shiv, does that...

May I request you to join back the queue please as we have other participants waiting for their turn?

Yes, sure.

We'll take our next question from [ Siddharth Chauhan ] from 360 ONE Capital.

I have 2 questions. Firstly, now we have net cash of INR 7,000 crores. And at what levels of cash -- and obviously, at this price, as you rightly mentioned, you're not going to buy an asset. You're just going to replace an older asset with a newer one. So then my question is at what level of cash would you start increase your dividend distribution to investors? That is my first question.

Yes. So we have increased the dividend distribution. Between last year and this year, we were at about 17%, 18%. We are now a little about 20%, probably closer to 25% for this year. So that's one. The second is actually we have also dropped off a little bit in cash since then because you would have seen we've done several transactions in the recent past. We've done some of these modernization transactions. So we've actually dropped our net cash position in the last month or so from in December. We are deploying some cash. And now whether INR 7,000 crores is a threshold or INR 8,000 crores or INR 5,000 crores, it's a matter of opinion. We believe that we can deploy this cash well in the next market downturn and that's why we are retaining it. In the meantime, we are paying out what we think are very decent dividends.

Understood. So that means in case if the cycle continues for, let's say, for the next 2 years, then we'll actually build up our cash balances. This is what I understand. Is it right?

Yes, build up our cash balances to the extent of what we are not able to invest in our modernization. We've been modernizing our fleet. While we have not done capacity expansion, we have been selling our older vessels and buying some more modern vessels. So yes, cash balance will build up. Till such time, we believe that we are not -- we may not be able to deploy the money profitably at a future cycle. But we are not close to that, not anywhere close to that.

Okay, understood. And secondly, any plans to invest in LNG fleet because you see a lot of LNG ships, which are under shipbuilding, and there's a huge supply which is going to come up in the next few years. What is your thought on that?

So see, the LNG business is very different. What happens is a lot of these LNG ships, firstly, they're very expensive. So you can't just buy one ship. They're right now currently for $250 million a piece. You can't buy in the secondhand market, you have to buy new building. If you go for a couple, you're going to spend a substantial amount of your investable surplus just to do this business, which will take away from other businesses, right? Secondly, in LNG, what we have seen is the contracts are longer duration. We don't have the spot market as our traditional businesses. So what happens is when you buy such an expensive ship and you get 10-year contracts, generally, they become project financing kind of returns. So what -- at least as of now, we see that, that building will provide suboptimal returns from tanker, bulker, LPG. And so at the moment at least we are not going to even consider that business.

We'll take our next question from [ Deven Sangoi from Page Investments ]

Congratulations on a good set of numbers. I have one question that there's been a lot of news of late on the dark fleet on the crude tanker side. And various Europe, Ukraine, America, all are seizing this dark fleet. What's the impact on the freight rates when such -- this has been the problem for crude market for a long and large part of this crude which was sanctioned was moving through this fleet. So how does it change the outlook in near and medium term, sir?

Yes. So we can at least tell you what has happened up until now. So since the war, which has been about now almost 4 years, whenever the U.S. or Europe or the U.K. have sanctioned these ships, they've gone out of the international trading fleet. But at the same time, a large amount of the Russian trade has gone up. So you've got something gone up from the demand side, you've got something gone up from the supply side. And so the sanctions, of course, has had an impact. But for us, the denominator numerator have more or less moved together. Of course, there is a disruption of the Russian trade where the inefficiencies of the trade, which we've explained before, has been a very large reason for the rise in the market. Now the difference that we have seen over the last 6 months is that the sanctions have become a lot tighter. And because these sanctions have gone off not only on the vessels, but have also gone on people, have gone on refineries. You've got Nayara which has been affected. We've got pressure coming from the U.S. even on India taking in more Russian oil. That has had a very big difference. And the main difference has been that earlier Russian crude was still moving. They used to export 3.5-odd million barrels before the war. They were doing that even during the war. However, in the last 6 months, we have seen that maybe 0.5 million to 750,000 barrels per day of Russian crude is not being able to find a destination, largely because India is not taking that much crude. And because of that, that eventually oil needs to be -- the refineries need to be -- their demand needs to be met. So that 750,000-odd barrels has been met from the international trading fleet. And so there has been an increased demand from countries like Middle East, South America, which is largely Brazil and Guyana and those kind of countries. And that has lifted the market. So if you see the last quarter, which is this quarter, October to December, and even as of January, the crude market has significantly risen based on this tightness. Now how this all pans out over the next 6 months, 9 months is anyone's guess. We saw somewhere in the news -- of course, we don't have data on that, but we saw somewhere in the news that even Reliance is going to take another 150,000 of Russian barrels. So how that's all working, frankly, we are not aware.

And sir, today, VLCC, new build and the secondhand price of less than 5 years, the difference is only 5% or less than 10%. And a lot of smart guys or smart operators globally are switching the secondhand or the older ships for the newer ones. Do you plan to do anything as far as the crude is concerned?

You mean switching -- so it just depends on what age you're switching from, right? So if we're selling a 15-year-old tanker and we're buying a 10-year-old, 5-year old, it's just based on the mathematics that we are doing. The view that we take also is that if you buy a ship today, I think I'm not sure exactly how the data point that you are referring to, but there are a lot of large owners that have done a lot of new building, right? And that new building comes over across multiple years, right? Now they may be getting a newbuilding because some of the older ship is going out or they may be net expanding. Largely, as an industry, there's not been a major expansion over the last few years. So one would assume a lot of the older ships are coming off. But it's just a matter of choice, whether you would like to -- let's say, today, if you've got a ship that is old and we buy a new building ship, then that ship comes 3 years from now, right? Now if that ship is coming 3 years from now, what will the charter rates be 3 years from now? If the bull cycle is currently present and we don't know whether it will last 6 months, 1 year, 2 years or 3 years, but the expectation is that if the market is strong now, better to get the earnings now. And therefore, the secondhand prices tend to rise disproportionately to the newbuilding prices in a strong market, and it tends to work the other way around in a weak market. Has that answered your question?

Yes, yes. I got it. Sir, last question, why is the scrapping despite of more than 18 years fleet, both on all the sites, whether you take it dry bulk, wet bulk or even crude is pretty high percentage, what we have seen in last 3 decades, but the scrapping doesn't happen?

So basically what happens is -- so see, whenever shipowner is coming to a survey, which is at the older end, it's every 3 years, you have to put in a lot of money to do the -- pass the surveys. If you can make up the operating costs and the dry dock costs and the markets are substantially stronger than that, then owners tend to pass the survey. There are certain protected trades, let's say, in the dry bulk trade, where you can sell. Maybe those trades are not available to people like us, but we can sell our old ship, players like us, to another player who has a protected trade and run a very old ship. The dry bulk fleet is not as old as the tanker fleet. In the tanker fleet, we've seen a large number of tankers land up in the sanctioned trades. So if you see the vessels that are carrying the Russian oil, a large percentage of them are the older tankers. So the market has to be conducive to support it. Eventually, products have to move, right?

And typically, when the rates are high, people tend not to scrap. So that's the main thing. When rates -- if rates drop, then you'll see ships getting taken out.

See, because scrapping can happen for 2 reasons, right? One is that ships do reach a particular life beyond which it's difficult to trade. But we don't see 18-year-old ships really being scrapped. Now between '21, '22, '23, you can play on the margin a bit. If the market is strong, the oil majors, the terminals, everyone will take the ship because no one wants a shortage of the ships.

We'll take our next question from Kirtan Mehta from Baroda BNP Paribas Mutual Fund.

I just wanted to understand your perspective in terms of the crude price has sort of jumped to around $70 level, indicating a potential sort of the risk on the Iranian barrels as well as some of the disruptions in the U.S. From the shipping side or crude ship tanker rate, are you also seeing similar risk getting priced into the shipping tanker market?

Nothing has happened on freight rates related to this. So this hasn't had an impact on freight rates. Obviously, it will be a big event for tanker market. But nothing has happened.

No, we've not seen really any correlation between the two.

If Iran risk is getting priced into freight rate.

No, not yet.

Sure. Another question was about the cash that we have been managing. Are we seeing any signs of some of the markets opening up during FY '27? Any green shoots -- early green shoots?

Honestly, it's very difficult. As of today, the prices are not at our levels. But to make a forecast in FY '27 what those price levels will be is anyone's guess.

Right. Probably the last question was about basically the way we show is that at a consol level, our stock price at probably around 25% discount to the underlying NAV. But if you adjust the cash from the NAV, which you mentioned at around INR 500 per share, then the -- actually the discount is much wider on the ship prices, which is a variable, which could be probably of the order of 40%, 50%. So is this more sort of reflecting the mid-cycle value of your shipping asset in your view or is it a discount to even the mid-cycle shipping value...

If it is 40% below, is that number correct?

Yes, it's below the mid-cycle value. It's probably mid-cycle value.

Yes, it probably mid-cycle. If you take -- if it is 40%, then yes, then you should probably...

We'll take a follow-up question from Rahil Dasani from MAPL.