IPO Preview: Navigator Holdings

Nov.20.13 | About: Navigator Holdings (NVGS)

Based in London, England, Navigator Holdings (NYSE:NVGS) scheduled a $203 million IPO on the NYSE with a market capitalization of $983 million at a price range midpoint of $18 for Thursday, November 21, 2013.

Ten operating company IPOs are scheduled for this week. The full IPO calendar can be found at IPOpremium.

F-1 filed November 6, 2013

Manager, Joint managers: Jefferies & Co., Morgan Stanley

Co-Managers: Evercore Partners, Fearnley Securities, Global Hunter Securities, Stifel

Summary

NVGS is the owner and operator of the world's largest fleet of handysize liquefied gas carriers. NVGS provides international and regional seaborne transportation services of liquefied petroleum gas, or "LPG," petrochemical gases and ammonia for energy companies, industrial users and commodity traders.

For the nine months ended September 2013 compared to the year earlier period, revenue was up 58% to $167 million, net income was up 36% to $30 million.

Valuation

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing Sept 9 mos

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Navigator Holdings Ltd.

$983

4.4

24.6

1.4

1.4

21%

Compare

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

Dividend

annualizing Sept 9 mos

Cap

Sls

Erngs

BkVlue

TanBV

Yield

Navigator Holdings Ltd.

$983

4.4

24.6

1.4

1.4

0.0%

GasLog Ltd (NYSE:GLOG)*

$983

8.9

18.9

1.6

1.6

2.9%

StealthGas (NASDAQ:GASS)*

$257

2.1

5.6

0.6

0.6

0.0%

*annualizing June 6 mos

Click to enlarge

NVGS is priced at a premium to GLOG, but NVGS's growth rate is higher.

Glossary

Conclusion

The rating on NVGS is buy. Seems like NVGS should be paying dividends, or should be set up as a limited partnership.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above:

Business

NVGS is the owner and operator of the world's largest fleet of handysize liquefied gas carriers. NVGS provides international and regional seaborne transportation services of liquefied petroleum gas, or "LPG," petrochemical gases and ammonia for energy companies, industrial users and commodity traders.

These gases are transported in liquefied form by applying cooling and/or pressure to reduce volume by up to 900 times depending on the cargo, making their transportation more efficient and economical.

The demand for seaborne transportation of these liquefied gases will continue to grow due to evolving energy and petrochemical market dynamics, particularly as a result of increasing U.S. shale oil and gas development, as seaborne transportation is often the only, or the most cost effective, manner of transporting gases between major exporting and importing markets, according to Drewry.

Fleet
NVGS' fleet consists of 31 semi- or fully-refrigerated handysize liquefied gas carriers, which NVGS defines as liquefied gas carriers between 15,000 and 24,999 cbm, including eight newbuilding vessels scheduled for delivery by December 2015.

In addition, NVGS has an option to build one further handysize newbuilding vessel for delivery by early 2016 and currently operates an additional semi-refrigerated handysize liquefied gas carrier under a time charter through December 2014.

Vessels in NVGS' fleet are capable of loading, discharging and carrying cargoes across a range of temperatures from ambient to minus 104° Celsius and pressures from 1 bar to 6.4 bars.

NVGS' handysize liquefied gas carriers can accommodate medium- and long-haul routes that may be uneconomical for smaller vessels and can call at ports that are unable to support larger vessels due to limited onshore capacity, absence of fully-refrigerated loading infrastructure and/or vessel size restrictions. In addition, five of NVGS' vessels are the largest ethylene-capable vessels in the world, meaning vessels capable of transporting and distributing ethylene and ethane cargoes, and five of NVGS' eight newbuildings will be among the largest ethylene-capable vessels in the world.

Finally, each of NVGS' newbuildings will be an Eco-design vessel incorporating advanced fuel efficiency and emission-reducing technologies, including the capability of conversion to the use of liquefied natural gas, or "LNG," as fuel. NVGS believes that owning fuel-efficient vessels enhances its returns as it allows it to meet charterers' increasingly stringent environmental requirements and to fully capitalize on the fuel savings under NVGS' voyage charters and contracts of affreightment, or "COAs."

Dividend Policy

No dividends

Competition

As of September 30, 2013, there were 15 major owners with liquefied gas carriers in the handysize size segment in service and on order.

NVGS is the largest owner by combined capacity of fleet and orderbook in the handysize segment with 496,925 cbm in its fleet and 172,000 cbm on order as of October 31, 2013.

In second place, Naftomar Shipping and Trading Inc. has nine vessels in service (179,000 cbm) and Skips.

Solvang is the third largest in the size range, with five trading vessels in the fleet (83,000 cbm) and zero vessels on order as of September 30, 2013.

5% stockholders

WLR Group 60.6%

Use of proceeds

NVGS expects to net $136.3 million from its IPO from the sale of 8.3 million shares. Shareholders intend to sell 3 million shares.

IPO proceeds are allocated as follows:

  • to fund the equity portion, or $72.7 million, due under NVGS' purchase obligations for the 2015 newbuildings, and
  • the remainder for general corporate purposes, including if the newbuilding option is exercised, to fund $17.6 million of $44.0 million required to purchase the option newbuilding.

NVGS currently expects the remaining $109.1 million and $26.4 million of the purchase prices for the 2015 newbuildings and option newbuilding, respectively, to be financed under future credit facilities.

Disclaimer: This NVGS IPO report is based on a reading and analysis of NVGS's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.