Cheap Surveys Dilute Returns


Cheap Surveys Dilute Returns, says a news article published in the Splash 247.

Vessel surveys and their resulting reports

In a world where things are no longer made to last one would not imagine that vessel surveys and their resulting reports would be added to the list of poorly put together stackable templates completed by a non-marine experienced individual and remotely verified by a shore-based expert.

We saw how houses sold like never before during the pandemic and remote digital viewings became fashionable. Share prices for fully digital property agents without the expensive overhead boomed on the stock market. Post-pandemic these solutions and offerings are almost nowhere to be seen, yet somehow this trend seems to have continued in the ship inspection world where the sums involved are many multiples of a typical house purchase.

A lot of attention ought to be placed on the current condition, survey status, major capex expenditure likely to take place in the near term and other replacement issues that will affect both the purchase price and the residual value of a vessel. In possession of reliable information owners, investors and banks can then decide on current and expected value of an asset and the earnings profile in between. From what we can see that is no longer necessarily the case.

Asset markets hotter

With the asset markets hotter than in many years ships are flying off the shelf with the new owners finding themselves in proud possession of an asset that suddenly needs to pull the stern tube, repair the main/aux engines because of breakdowns or cargo system underperformance.

All seriously affecting the revenue generating capability of the ship and as with any asset intended to generate a return it is always difficult to catch up on a poor start. Additional working capital to perform the repairs may be needed and that may not come cheap further eroding the nice initial expected return calculation.

A revenue generating asset

A ship is only an empty vessel and not a revenue generating asset if all the above and more are not fully operational from day one of ownership. Clearly ships are sometimes bought with drydock and other items due (typically in a distressed or rushed sale) but even then, how do we make sure we do not acquire more headaches than we bargained for?

A proper survey by trained professionals with years of experience and an ability to not only see the superficial aspects and capabilities of a ship but also dig deeper through conversations with the Officers and crew onboard to understand the full history and commercial performance of the ship.

“In my experience even with a highly experienced surveyor and solid inspection framework things can get missed but those are typically small and manageable, and the ship can still generate revenue from day one of ownership. I therefore find it challenging to believe that this can be performed by surveyors with no marine background and experience as we now see is now quickly becoming a norm,” Roine Ahlquist, CEO of Telegrafholmen Shipping, told us recently.

Poor quality surveys will lead to poor acquisition decisions ultimately leading to disappointing and hard to explain results for shareholders.


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Source: Splash 247


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