Navios Maritime Holdings: Strong Underlying Value Play

| About: Navios Maritime (NM)
With a current Market Cap of $325M, Navios Maritime Holdings represents a strong valuation play through its core operations as well as its combined interest in 3 other (2 publicly-traded) Navios companies. I have recently written articles that argue below-liquidation trading values of shipping companies (Star Bulk Carriers (SBLK), Paragon Shipping (PRGN), Excel Maritime Carriers (EXM), DryShips (DRYS)); however, this company represents almost no near-term financial concerns and an extremely strong underlying business arrangement. Navios is a very efficient company with strong industry experience, safe debt terms, and a huge global trade footprint. Most of the current information in this brief analysis was garnered from NM’s 2Q-11 slides which were posted on Monday (22 August).

Top Efficiency/Break-even Points with fixed charters
NM has 95.2% of its remaining 2011 days secured with estimated cashflow (earnings including interest, but before depreciation, amortization, or taxes aka EBDTA) of $7,454 per vessel per day.

NM has 55.9% of its 2012 days secured with estimated EBDTA of $10,091 per vessel per day.

Fleet Valuation/Relaxed Debt Terms/Strong Current Coverage

Navios Maritime directly owns a fleet of 14 Ultra Handymax (7.5 avg age), 2 Panamax- (10 yr avg age), and 11 Capesize (1.5 yr age age) vessels. It also charters-in 7 vessels, is awaiting delivery on 1 vessel (4 additional options for ‘13/’14), is awaiting long-term charters on 11 vessels, and controls an additional 9 vessels through its Keimar management agreement.

NM has $1.14B net debt backed by $1.77B in net vessel assets (50.3% debt-assets total). Although this is a sizeable amount of debt compared to other trading peers, NM has extremely relaxed credit agreements that do not involve required coverage ratios and have far-out maturities ($424.5M in ’17 and $633.8M in ‘19+).

Navios Maritime Partners (NYSE:NMM) (27.1% owned by NM)

NM’s equity holdings represent a current market value of $186M. These holdings will contribute an estimated dividend income of $22.4M per year NM’s bottom line.

NMM owns a fleet of 18 dry bulk vessels (11 panamax, 6 capesize, and 1 ultra handysize). As an LP, almost all of the net income is distributed directly to shareholders.

Navios Maritime Acquisitions (NYSE:NNA) (53.7% owned by NM)

NM’s equity holdings represent a current market value of $66.5M and will provide an estimated dividend income of $4.4M per year to NM’s bottom line.

NNA focuses on tanker acquisitions and currently has a fleet of 26 total owned vessels (average age of 4.2 years). 98.1% days secured for ’11 and 62.7% secured for ’12.

Navios South American Logistics (63.8% owned by NM)

This business is split into three sectors: port terminal operations, barge business, and a cabotage business. These businesses earned a combined $20M in EBITDA, and $2.5M in net income in the first 6 months of 2011, contributing $1.6M to NM’s bottom line. I am estimating approximately $4M of net income for FY2011.

  • Port Terminal Operations - owns a bulk terminal in Uruguay that boasts a tax free zone and has 360,000 mt of dry storage capacity. Also owns a fuel terminal in Paraguay with 35,600 of storage.
    --($7.35M EBITDA/$5.94M net income)
  • Barge Business - owns 295 barges and push boats as well as 1 floating dry dock .
    -- ($4.38M EBITDA/-$8.25M net income)
  • Cabotage Business - 6 ocean tankers and 2 self-propelled barges.
    --($8.31M EBITDA / $4.82M net income)

Return to Shareholders

Navios Maritime boasts a current dividend yield of 7.5% (6 cents quarterly). With the strength of NM’s balance sheet, this dividend is stable, however, do not look for increases in the near future.

Overall Outlook

Prior to conducting any business under its core fleet or charter operations, NM already starts with an estimated net income line of $30.8M (EPS of 30 cents), with the aforementioned cost. If you still aren’t convinced, perhaps this inspiring video featuring NM’s CEO will help. Although I must admit that the "Greek Approach" doesn't inspire much confidence.

Disclosure: I am long NMM. I may enter into a long NM position within the next 72 hours.