Aegean Marine: Growth Stock Recovery?

My last few articles have focused on the high yield stocks I follow and how the current market disruption has pushed these stocks to levels where they are yielding 15-20% despite the prospects of continued strong payouts. It is not a stretch to believe these stocks will recover nicely once they prove the can continue to pay their dividends. My next question is, what are the prospects for growth oriented stocks? Profits from growth stocks require an answer to two questions: Will the company continue its growth path? And, will the market care?

Let’s take a look at the once-upon-a-time very hot Aegean Marine Petroleum Network (ANW). ANW went public in December 2006 at $14 per share and traded in the high teens until August 2007. The price climbed up to almost $44 by the end of October. The share price fell back to $25 in January 2008, up to $48 again in June and below $11 per share on Oct. 15. In the meantime, the company has continued to expand in the highly fragmented marine fueling business. It has doubled the number of service centers and just recently announced the building of a 12th in the Caribbean. There is a long term plan in place to grow their bunker delivery fleet from the current 29 to 52, up from 12 in 2006. At the same time ANW is developing a global network of double hull bunkering tankers local regulations are forcing competing single hull tankers out of service.

All of this has allowed Aegean Marine to grow its revenues at a 42% pace over the last 2 years. By the end of 2010 they will have all of their ordered bunker tankers in service and revenues should really start flowing to the bottom line. As ANW gets established in the newer service centers,it can grow revenue by increasing product delivery by vessel per day as well as increasing the number of tankers in each port. The bottom line is that Aegean Marine has several avenues of revenue growth from industry consolidation to increased utilization of their own assets.

ANW stock has been driven down by the overall bear market and a linking of the company to the Baltic Dry Index, which has fallen 70% in recent months. How much their customers' ships earn has no effect on Aegean’s revenues. If a dry bulk ship is now earning $50,000 per day vs. the $150,000 of 6 months ago, it is still earning revenue and burning fuel to deliver its cargo. ANW also benefits from a diverse customer base including cruise and military ships as well as dry bulk, tanker and container carriers.

I believe that ANW will continue its strong growth and at current share prices is very undervalued. I will be increasing the holding of ANW for this site’s hypothetical Opportunities Portfolio.

Comments

[PeakOiler:]

This company has negative cashflow and $150 million of debt, with less than $1 per share in cash. Explain to me please, what redeeming features ANW has besides the fact it trades at about 2 times book value? Show me the money!

2008 Oct 20 09:58 PM