Navios Maritime Holdings (NM) recently announced its Q1 earnings for 2013. In preparation, I analyzed the previous earnings report of NM along with the recent quarterly reports of its major holdings - Navios Maritime Partners LP (NMM), Navios Maritime Acquisition Corp (NNA) and Navios South American Logistics. I found that NM Holdings provided some compelling value to those interested in either NMM or NNA. Upon further research, I am most compelled by the private South American subsidiary. NM has been on my watch list for a couple of years now. Considering the most recent uptick in shipping stocks, Eagle Bulk Shipping (EGLE) for example, I decided to pull the trigger on some shares. Coincidentally, I purchased my shares on the same date as which the data would be collected for NM's recent earnings report. Looks like I got a deal:
Weight @ 5/17/13
Price @ 5/17/13
NMM + NNA
So the question is - what exactly makes up the mystery 7.55% or $0.36 per share I paid for? Let's review the holdings of NM:
Navios Maritime Partners LP
NMM is the largest holding and comes with a juicy 11.9% dividend. NM owns 23.4% of this company, which includes assets of 24 dry bulk vessels. The average age of the fleet is 6.5 years compared with the dry bulk average of 9.7 years of age; 80% of the contracted revenue is secured by charters running longer than three years, and 84.8% of 2013 charters are already covered. This is a pretty optimistic looking picture going forward.
Navios Maritime Acquisition Corp
The other substantial investment is with NNA, which takes advantage of distressed sales and deals with the transportation needs of gases, fuel, chemicals, animal fats, crude oil, naphtha, kerosene and vegetable oils (Naphtha cargoes are flammable liquid mixtures). Assets include 36 vessels, 23 currently in the waters with an average age of 4.7 years with the other 13 to be delivered (eight this year, five next year, nine of which are being built brand new). Consequently, the new vessels will allow available revenue days to double between 2012 and 2014; 86% of 2013 and 48% of 2014 has already been booked. Days in 2013 have a 9% return on cost and 80%+ of the fleet participates in a profit-sharing program, which is key to driving growth in NNA. Q1 2013 returned $.04 per share; which is more than the full year of 2012. NNA comes with a 5.3% dividend.
Navios South American Logistics
NM owns 63.8% of Navios South American Logistics. The company operates exclusively in an area of South America the size of Mississippi, and has massive growth potential. The region accounts for 55% of the global soybean production and is beginning to dive into the exportation of Iron Ore to China. There are three divisions: Port Terminals [dry (cereals, soybean and iron ore) and liquid (diesel and naphtha) storage and transfer], Barges [289 barges and push boats (liquid and dry), one floating dry dock] and Cabotage (domestic transport) between Brazil and Argentina [six tankers, two barges (refined oil products)]. As far as competition in the ports, Navios is the largest dry port in Hidrovia, the largest liquid port in Paraguay, the second-largest barge in Hidrovia, and the largest cabotage off the Argentinean coast. This is a very targeted and niche space. It's also one of the few investment options to capitalize on the global demand for soybean - aside from a futures play with the Teucrium Soybean ETF (SOYB).
Navios Asia deals
Most notably this quarter we saw an expansion with a new subsidiary - Navios Asia LLC. Six new vessels were acquired through Navios Asia and an additional four through separate joint ventures with Japanese ship owners. The value in the 51% stake in Navios Asia is the $114 million ship fleet, averaging in age 6.1 years. The Japanese joint venture is valued at $66 million and the ships have an average age of 7.75 years.
To put the fleet values into context:
NMM - $713m
NNA - $1,102m
Navios Logistics - $356m
Navios Asia - $144m
NM Additional - $66m
This recent quarter saw a dilution in NNA from an ownership of 52.2% to an ownership of 51.6%. With that there were new acquisitions in Asia, and other uses of the NM cash reserves. Below is a NM holdings analysis I did prior to the NM Holdings earnings report for the date 4/15/13. Data provided by NMM, NNA and Navios Logistics:
Weight @ 4/15/13
Price @ 4/15/13
NMM + NNA
Using this table together with the previous table we can get a better picture of how to assess what NM's stock value really is.
NMM's share price x 15% or so
+ NNA's share price X about 50%
= 85%-90% of NM's stock price value
Any wild swings in either NMM or NNA should be reflected in such a way with NM.
Using the above formula I am a buyer when NMM + NNA makes up 90%+ of NM's value and I'm a seller when they make up less than 80%. I believe Navios South American Logistics has potential to be a big winner and maybe even be spun off as an IPO eventually, but the additional assets and private deals of NM and Navios Asia are just complementary to NM's true value. To pay a 20% premium for the unknown is just unreasonable.
Navios Maritime Holdings is a diversified play on dry bulk shipping. Not only do they operate in dry bulk, but also liquid vessels and ports. It is a value play on Europe, especially Greece since this is where the Navios headquarters is located. Most intriguing is the play on global soybean demand as well as South American trade. Sporting a 5% dividend and emerging into China and South America, I'd say NM is a keeper for any portfolio seeking this type of exposure.