Sino-Global Shipping America, Ltd. (NasdaqCM: SINO) ("Sino-Global" or the "Company") is a Virginia company engaged in shipping, chartering and related services. Founded in 2001, the Company went public in 2008. In response to operating losses suffered thereafter due to the slowdown of the Chinese and global economies as well as rising operating costs, Sino-Global implemented a series of restructuring initiatives that reversed the decline and catalyzed our current success and growth with seven consecutive quarters of net profitability to date.
Among several changes in Sino-Global's restructuring plan that helped make the Company's turnaround successful, the Company exited unprofitable service agreements to raise margins. This included those service agreements associated with Beijing Shourong Forwarding Service, Co., Ltd., a former major customer that once drove approximately 60% of the Company's shipping agency revenues.
The Company also reduced its dependency on its shipping agency business by leveraging the support of its major shareholder, using his $3 million investment to expand Sino-Global’s service platform and introduce two new complementary services: shipping and chartering; and inland transportation management services.
Beginning with its ship agency services, Sino-Global serves ships coming to and departing from a number of countries, including Australia, South Africa, Brazil, China and Canada. During the nine months ended March 31, 2015, fewer ships were served, resulting in a decline in revenue from $4,628,578 to $4,500,897 from the same period 2014. Despite the decline, the shipping agency's gross profit improved from fiscal 2013 to the nine-month period ended March 21, 2015, as a result of improved operating margins, which grew from 3.4% in the three months ended March 31, 2014 to 9.4% in the same period 2015.
In addition to these improvements, Sino-Global rebuilt its business by expanding into shipping and chartering services, inland transportation management services and ship management services. Mr. Zhang is the owner of the Zhiyuan Investment Group (“Zhiyuan”) which is currently in a 5-year strategic relationship with Sino-Global. This has allowed the newly established inland transportation management services to boost revenues 49.5% over one year to a record $1.3M during the three months ended March 31, 2015. Sino-Global plans to further monetize this relationship while creating a larger customer base to increase the profitability of its inland transportation management services.
Sino-Global's shipping and chartering service, initiated in the quarter ended September 30, 2013, generated revenues of $1,937,196 and a gross profit of $646,148 for the nine months ended March 31, 2014, as a result of the agreement with Zhiyuan Investment Group. The shipping and chartering service is now being advanced by the acquisition of the M/V Rong Zhou ("RZ"), an 13,000dwt oil/chemical transportation tanker with a current market value of $11.9M. The vessel seller, Rong Yao International Shipping Limited will be paid total consideration of $10.5M.
Sino-Global chose to acquire the RZ because of its stable and growing charter rates in the expanding specialty shipping industry. This large growth potential is a result of high demand for the underlying cargoes, such as palm oil and other chemical products, from emerging markets. In this market, RZ is expected to generate $2.3M in revenues in the 2016 fiscal year.
To facilitate a smooth transition and management of RZ, Sino-Global additionally has time-chartered the vessel from the vessel seller, Rong Yao International Shipping Limited, for $3,500 per day for two years, and, in turn, Sino-Global time-chartered the vessel out to a third-party charterer for the same two-year period for $7,500 per day. Based on current projections, the time-charter agreements are expected to generate profit of $1.8M after factoring in the non-cash compensation expenses related to common shares issued to technical consultants. The first month of the time-charter agreement has generated net revenues of $225,000 and cash flows of $120,000 to Sino-Global.
"This payment is a significant milestone for Sino-Global,” said CEO Lei Cao. “We believe it tangibly demonstrates a new phase in the growth and expansion of Sino-Global as we expand and transition our business from strictly being a service provider in the shipping industry to an asset owner with an integrated, scalable service platform in the shipping industry. We believe as a result of the two-year time charter agreements, our shipping and chartering services will begin to make a significant contribution to our revenue growth going forward.
Since the restructuring of Sino-Global began, the Company has produced seven consecutive quarters of net profitability, up to the most recent quarter ended March 31, 2015. Total revenues increased 20.8% to $2.5M for the three months ended March 31, 2015 from the same period in 2014, with inland transportation revenues growing 49.5% to a record $1.3M. As of March 31, 2015, Sino-Global has $1.1M in cash and $6M in working capital, up from $900K in cash and $3.7M in working capital at the end of fiscal 2014, with no debt. Sino-Global has an attractive capital structure, in addition to anticipated future cash-flows from its upcoming operations, to meet its capital needs. This is important, as it allows Sino-Global to opportunistically evaluate future acquisitions similar to RZ that are accretive to the Company.
The success of Sino-Global's restructuring efforts is evident in the Company's recent financial results. After multiple years of losses, the consecutive quarters of profitability can be attributed to the new services and strategies initiated by Sino-Global. With a wide platform of services and expected completion of the RZ acquisition, Sino-Global has a range of profitable opportunities upon which it plans to continually expand. CEO Lei Cao maintains their goal remains to “grow the business through effective cost control, monetization of strategic relationship with Zhiyuan, and new service offerings along the shipping industry value chain,” delivering growth and future earnings. Sino-Global aims to achieve $5M of net profit over two years, and plans to acquire either two more small chemical tankers or Panamax bulk vessels to create a small fleet.
The Company’s experienced management team is dedicated to growing naturally and, through complimentary acquisitions, expanding current services. Sino-Global anticipates another healthy fiscal year with this cautiously aggressive growth mentality.
Sino-Global’s management team is built with the proper expertise and credentials to create a group that together can make the best decisions for Sino-Global.
The CEO, Lei Cao, founded Sino-Global and has an immense knowledge of the Company. He has 30 years of experience in the shipping industry and shipping agency business, which gives him a unique understanding of Sino-Global and how it should be navigated. Mr. Cao received his EMBA degree from Shanghai Jiao Tong University in 2009.
Anthony S. Chan is the EVP and Acting CFO. He is a seasoned CPA licensed in New York with over 25 years of experience in auditing, business restructuring, mergers and acquisitions and SEC reporting, and having spent over a decade at Big Four. Mr. Chan received his MBA from Baruch College, CUNY in 1989.
Michael Huang, the COO since 2010, has worked as Sino-Global’s Director of Australian Operations, Vice President of Operations, and Manager of Operations. Mr. Huang received his BA degree from Guangxi University in 1999.
Africa Li, the CTO since August 2014, is a seasoned engineer and has over 25 years of experience in shipping building and ship management.
For more information about Sino-Global Shipping America, Ltd., go to: www.Sino-Global.net
The company paid consideration to SNN or its affiliates for this article.
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