The Long Case for Aegean Marine Petroleum

Our long stock pick for this 2nd week of January, is Aegean Marine Petroleum Network (ANW).

Aegean Marine Petroleum Network, Inc. is a marine fuel logistics company that physically supplies and markets refined marine fuel and lubricants to ships in port and at sea. As a physical supplier, the Company purchases marine fuel from refineries, oil producers and other sources, and resells and delivers these fuels using its bunkering tankers to a base of end users.

As of December 31, 2006, the Company owned a fleet of 10 double hull and two single hull bunkering tankers with an average carrying capacity of approximately 5,940 dead weight tons. As of December 31, 2006, it also owned a single hull Aframax tanker with a cargo-carrying capacity of approximately 92,000 dead weight tons and one double hull Panamax product tanker with a cargo-carrying capacity of approximately 68,000 dead weight tons. In October 2007, the Company acquired Bunkers at Sea, a marketer and physical supplier of marine fuel. In November 2007, it acquired Portland Bunkers International's marine fuel terminal.

The Company sells and delivers these fuels to a diverse group of ocean-going and coastal ship operators and marine fuel traders, brokers and other users through its service centers in Greece, Gibraltar, Singapore, Jamaica, the United Arab Emirates and Belgium, and plans to commence physical supply operations in the United Kingdom and Ghana during the first quarter of 2008.

We like the shipping sector a lot right now. One of our top and best performing holdings is TBSI, an international cargo shipper. Aegean fits right into this same shipping sector growth theme by supplying essential fuel, supplies, and services to ocean going vessels.

Technically, we see a nice long trade setup for ANW on the chart right now. Buy Stop at $31.90, Stop-Loss at $28.66, and Short Term Take Profit at $38.38 to $41.62, and Longer Take Profit at 46.50 to $55.10. This longer reward-risk ratio on this trade setup is 4.5:1, providing the stop-loss doesn’t get hit. Nice returns in which we are always looking in a market of stocks that have the potential to provide us a minimum 3:1 plus reward risk on our money.

Fundamentally, Aegean's PE is almost 50, which may look expensive at first glance, but after analyzing the entire shipping industry and forward earnings potential, we see growth rates expanding over time for Aegean. Institutions currently own about 30% of Aegean, leaving plenty of room for them to invest more. Their current debt to equity is about 40% which is below the maximum 50% or less requirement we look for in most companies we look to invest in short or long term. Total Net Income for past years has been 17.62 for 2004, 21.48 for 2005, and 24.23 for 2006 showing respectable bottom line growth. We don’t see margins getting squeezed anytime soon, and Aegean could possibly see their margins expand now with their addition of another service ship into their fleet, thus providing more support for a higher stock price.

Aegean has some new news that promises to grow its business in the near and long term. Aegean has just taken delivery of a New Bunkering Tanker.

Aegean Marine Petroleum January 8th announced that it has further expanded its marine fuel logistics infrastructure with the delivery of the Amorgos, a 4,600 dwt newly built double-hull bunkering tanker from Fujian Southeast Shipyard in China.

E. Nikolas Tavlarios, President, commented,

With the delivery of our fourth bunkering tanker newbuilding since our IPO, management continues to execute its well-capitalized growth plan. By further expanding our marine fuel logistics infrastructure, we have once again strengthened our position to take advantage of the growing demand for a full-service marine fuel solution from procurement to delivery...

We remain intensely focused on pursuing growth opportunities that meet our strict return criteria exclusively within the global marine fuel logistics industry as we have in the past. The launch of our new service center in Northern Europe combined with our new service centers in the United Kingdom and West Africa, which are scheduled to commence operations in the current quarter, bodes well for Aegean to further increase sales volumes as we continue to enhance our leading industry reputation.

With the delivery of the Amorgos, the Company has deployed the Aegean Tulip, a 1993-built 4,853 dwt double-hull bunkering tanker to West Africa from Gibraltar.

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Disclosure: Author is long ANW.