(B)(N) BOX SeaCube Container Leasing Limited

Deal Book. The Ontario Teachers Pension Plan (OTPP) has just bought all of SeaCube Container Leasing Limited, lock, stock and barrel, so to speak, for US$467 million (Reuters, January 18, 2013, Ontario Teachers’ to buy SeaCube Container Leasing for $467 million). SeaCube currently pays a dividend of $1.20 per share or $24 million per year to its shareholders for a current yield of 5.9%.  It’s been in the Perpetual Bond™ since $12 in late 2011 (please see Exhibit 1 below) and we can sell it today for $20 or wait for the offering price of $23 when the deal closes over the next few months. The pension fund plans to operate SeaCube as a standalone business – they are the new owners – with the current management team remaining in place.

If we roll back the calendar – and we may because the container business doesn’t have a lot of room for innovation and its assets “rust forward” whether used or not – SeaCube was trading for $10 to $15  per share in late 2011 and once the deal is completed, will have no share price at all. Zero. Who will buy it from them and for what price and what reason?

It seems like an odd question but most public and private pension plans are under water and need to produce 10% or more in investment returns every year for the next dozen years or so that we might eventually retire with some grace and get back some of what we put in. How does one get a 10% yield of $50 million per year from a company with less than 100 employees and gross sales of $160 million at the present time and a net income of less than $50 million, up from a loss of ($15 million) in 2009, in a very competitive business? Does the OTPP expect to be “Mr. Container” in five years time?

Exhibit 1: (B)(N) BOX SeaCube Container Leasing Limited – Risk Price Chart

SeaCube Container Leasing Limited and its associated companies acquire, own, manage and lease containers used in global containerized cargo trade.

(Please Click on the Chart to make it larger if required.)

From the Company: Container equipment has enabled the growth in global containerized trade because it allows efficient movement of goods via multiple transportation modes, including ships, rail, and trucks and we  lease out equipment primarily under long-term contracts to the world’s largest shipping lines. We have long-term relationships with an extensive group of customers in the intermodal shipping industry and our companies employ 75 people in 7 offices in 4 continents throughout the world to provide high quality equipment and excellent service with the global coverage.

In contrast, last year’s S&P 500 NYSE Perpetual Bond™  produced +20% plus another 2% to 3% in dividends (please see the Total Line in Exhibit 2 below) and we know exactly how that was done and can do it again and again and again and as long as there is at least some “economy” going on somewhere.

Exhibit 2: S&P 500 NYSE – The RiskWerk Company Perpetual Bond – Cash Flow

(Please Click on the Chart to make it larger and again if required.)

The Cash Flow Chart is our standard chart and has been described in many of our Posts. For example, the above Chart shows that we invested $9,634,000 in late December 2011 and early January 2012 by buying uniformly blocks of 1,000 shares in 176 companies (as opposed to $18,420,000 if we had bought similar blocks in them all). The market Perpetual Bond™ is an actively managed portfolio of stocks and our buying and selling activity is shown in the monthly Count, Buy and Sell lines. At the end of December 2012, the portfolio was worth $13,612,000 with 235 companies in it and a margin account (optional) of $2,057,000 for a net Total of $11,556,000 should we chose to retire the margin account. The portfolio obviously “scales” in the $11 trillion market of the S&P 500 NYSE and $10 million could just as well have been $100 million or $100 billion without creating any waves, so to speak.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.