Adjusted Return

Long/short equity, value
Adjusted Return
Long/short equity, value
Contributor since: 2011
The 20-F is quite correct: "[...], are RESPECTIVELY chartered out" ie. 5 to the same charterer (HMM), another 2 to the same charterer (YM).
The name of the vessels is normally a telltale in liner charters. You can also check trade articles at the time of the transaction and NMM presentations from Q4 2014 onwards referring to YM as a charterer. As you seem doubtful, you can also have a look at Yang Ming's fleet at
In fact as of end Q3 15 (fifteen) of NMM vessels were on charter to NM, all of them at inflated rates when charters struck.
To the author, the YM vessels are Yang Ming charters, not HMM.
This is an excellent article pointing out all the right things. The 60% EPS payout is even more conservative as DHT has adopted a 20-year depreciation policy for a while now. I don't know who owns the convertible, lucky guys.
As the name suggests the YM vessels are chartered to Yang Ming.
There are some SA posts pointing out the dire condition of HMM on DAC/CPLP articles. You have a much wider audience here though. And there have been many more posts and articles pointing out the outrageous spin of the Navios family PR, and the blindness of MLP shipping investors.
What else could be worse other than HMM? The "profit sharing" with NM is actually "loss sharing" for a year or so and NMM owes booked money back to NM for upwards of 10 charters. Never seen a NMM conference call discussing that.
Nice article. It is pretty clear that the CFO mentioned that the impact of deferred taxes (mainly linked to the FSOs) will be minimized going forward, which is quite the opposite of what you are suggesting. EURN will be fully subject to tonnage tax in its flag states, and this is peanuts.
EURN is run much more conservatively than Frontline. But the markets seem always to like the people who promise everything now (Frontline and any other full payout machine) and forget about tomorrow.
All 7.67m shares are convertible right now regardless of price, the restriction is max. 45% ownership by nm. The way they issue shares to management, nm will have headroom to convert soon. And honestly it is a matter of fact that nm and family issue possibly the most exaggerated pr imaginable, you need to go to page 15 to find gaap income.
Your articles are very professional recently, well done. On the qualitative side, I think NNA and the Navios family in general are poorly managed, engage in atrocious PR spin (different metrics almost every time, in particular in extraordinary items, pro forma statements, ridiculous hints that the joint ventures are something exceptional etc), and favour bondholders and insiders over common equity.
NNA has turned profitable but is highly leveraged and must also support now the parent with cash. There is indeed upside even if companies such as Euronav are much better run and offer more upside with higher protection. And iof course, NAV matters.
The share count should include the 7,676,000 common shares from the preferred C shares owned by NM - there are some limitations for conversion but they do exist. I'd add a couple of million new restriced shares to be issued to insiders this year (plus the other couple of million of issued but non-vested ones).
The sale price is what it is. The book gain though shows how aggressively Euronav depreciates its assets (20 years/0 residual value) i.e. that reported profit is very conservative as it includes very high depreciation compared to peers.
I think Euronav is looking at a $120m+ Q4 profit.
The Q2 results of HMM are at and I leave you to make the calculations, focusing on current liabilities. They can't make operational profit when other lines took the opportunity of low bunker rates to show record results. Price war continues and in fact M2 has muscled in to recapture lost market share.
After selling various other parts HMM is down to its shipping segments. They still need a restructuring; now, will this be additional equity from friendly state banks and chaebol sisters or something more drastic, I can't say - but I find the risk very high. In a killer move to my argument HMM is 30% up today in crashing markets so perhaps something was arranged already.
It is difficult for me to see how Hyundai Merchant will avoid restructuring this year. CPLP will be less affected than the cowboys at NMM but those five good charters are not safe. (Danaos - DAC - is also at high risk).
Good writing, even if I have very set - negative - ideas about MLPs. Btw, there are 135 million total units, so book equity per unit is around current share price.
Do we get to vote? There are many knowledgeable (and respectful) commenters in your articles but it is only realistic to believe that only assets, rather than whole companies, are attractive for any cash-rich buyer.
More generally, banks and bondholders have a very bitter experience with zombie loans and losses in other shipping sectors over the last few years, and they may be inclined to take over the assets much faster this time around, while values are at least equal to outstanding loans.
On the numbers, the second MR had instalments paid of $8m at 31/12/2014 (F-15 of the 20-F) and a purchase price of $37m. This leaves $29m to pay - TOPS say they only had $20m remaining to pay. We'll see.
You seem to rationalize the award of 10% of the company. Pistiolis used to pay $2m in annual "rent" for office space, so it is true that he has calmed down. Look out for a personal cash infusion or conversion of the Economou Delos receivable soon.
Congratulations! CEO Pistiolis could only issue to himself 10% of the company this spring, the maximum possible before triggering the price adjustment mechanism in the warrants, so now you own 4.05% of the diluted stock.
Top Ships has siphoned off hundreds of millions from the U.S. stock markets. They are so tainted no serious underwriter will touch them, resorting to penny stock promoters such as Aegis, for their current incarnation as a public issuer.
Probably you know their history but for some reason feel safe.
Anyway, as to your numbers, the logical net result of the sale and leaseback transaction is a $20m book loss (as the vessels are booked at $37-38m but sold at $29 ech) and a net cash (before working capital) of a maximum $8m. No wonder they haven't published Q1 yet! There remains a huge funding gap for any future delivery.
Remaining listed with the ability to issue free shares is so valuable to any Pistiolis-type shipowner (hey, did I see George Economou's son in TOPS board?) that a going private transaction never makes sense.
Hi, this is not correct, you list the number of rigs operated by the oil companies. The correct statistics are rigs managed/owned - you will only see very few rigs owned by producers. A full list is here:
Good article, I would add Maersk as an acquirer, possibly the only player than can afford a large acquisition and easy replacement of high yield debt. But it is better to pick assets only than close to bankrupt companies, such as Vantage and quite a few others if the environment persists.
I think the original article was at CNN:
Excellent video of the TI Europe, a bit of a shame that CNN spends that type of money and can't get the charter rate right (it is $28,600/day right now but her charter renews in September so $40k+ is likely).
Simply take the author's final table and add $80-100 million to cash flow and profits (under every rate environment), to see the earnings power of the company, which should also be looking for a Suezmax block acquisition soon.
Well JM, congratulations for putting in the effort and covering the only crude tanker company that due to its conservative management and accounting policies has not gone bankrupt or completely destroyed shareholder value over the last years - rather the opposite. Euronav continues to be the best play in the sector in any type of market.
I'm not going to nitpick on your article. However, your "efficiency and cash flow potential" section is seriously flawed: you calculate revenues on TCE (what other companies report as "net revenue") but you include voyage expenses, which are part of gross revenue, as cash costs (by the way, this is the Suezmax fleet trading spot). These expenses are excluded. You inflate cash breakeven by at least $5000 per vessel per day - Q1 voyage revenues were>$20million. The analysis of all previous years suffers from the same flaw. In fact it is surprising that you talk about reduced bunker costs without realizing that they are never part of cash breakeven when you use TCEs.
Please think about it and submit a correction - you have done a lot of work to let yourself down like this. You may even end up loving the result. Spread the word.
Well, it's at the end of the 10-page press release, together with balance sheet and p&l
In fact the Q1 press release does contain a cash flow statement. There's a lot of noise with working capital and the joint ventures but I'd say the normalized quarterly operating cashflow after interest is more than $100m and will keep growing. Assuming rates hold, which is currently the case. Q2 seems as good as q1, and there are already fixtures at above $60k well into q3. Very promising.
Thank you for the comment. First of all, the article doesn't discuss prospects for the LPG market. Unfortunately it is too complicated for anyone, or at least for me, to provide a real assessment of the impact of oil pricing on the economy, let alone any link to gas or LPG. Cheap oil is good for the consumer, bad for the banks and investment. Demand growth for oil and derivatives is steady, even if not the one wished for.
The article makes the point that returns in the small pressurized LPG shipping market are low and will probably remain low through 2015. This has not been a secret and is confirmed in fact by H. Vafias in the Q4 conference call and a recent article in Lloyds List: Other segments in LPG enjoy spectacular returns for the moment.
Stealthgas is a conservatively run, low cost and low-gearing company, able to withstand a sustained depressed market, using also the oil tanker fleet for liquidity. They have been scrapping older LPG vessels already and the market should rebalance in 2016. The levels reached this year ($5.50) were an excellent entry point (re-entry for me). A buyback programme seems to sustain the stock above $6 but the liquidity is very low. I would be cautious at current levels and rather wait for the 2015 Q1 results to get a better price.
To Darren McCammon, as unfortunately the author is really nowhere near the ballpark.
There is no "convoluted incorporation". Most, if not all, shipping companies incorporated outside the U.S. are not subject to income tax in their place of incorporation. At most, they are subject to a token tonnage tax. CPLP is a nothing more than a synthetic shipping MLP like many others.
Depreciation is a real expense by the way. Depreciation in an industry doesn't change because you call yourself an MLP. There is simply a high-yield market to be exploited.
CPLP is run smarter than most, recently structuring their acquisitions at below market value to create headroom. Doesn't cost the sponsor entity nothing, as the vehicle is gold to them. Still, lots of units to feed.
Good luck
"What prompted such stunning reversal is anyone's guess, particularly since the transaction is between related-parties".
Let me guess that Tankships could not be sold even to the gullible U.S. market. Management fees of >$2000 per vessel per day, plus 1.25% on revenue for commercial management plus another 1.25% on revenue for charter sourcing, and the dynamic duo of gorgeous George and nephew Tony at the helm - combined value destructed/shifted to private interest in excess of 1B. DRYS shareholders start from a bottom but putting fresh money at IPO valuations in a George venture is simply crazy.
Thanks for reading this post, instanton. It's good to see Farstad picking some commercial talent - they will need all the long-term contracts they can get.
Unfortunately I don't have much to add. Q4 was a loss due to some small impairments and a large exchange rate impact on the company's debt. 2015 will be "challenging" to say the least, across the industry. But I will hold, for the reasons stated in the post above.
These are good questions. Of course I'm in favour of stock buybacks, at the current price, and these are already happening, supporting the price. I guess they can add some $10m to the authorization when they announce at the end of the month.
In fact I propose the preferred to continue funding such buybacks while maintaining compliance with any debt/equity covenants, newbuilding funding taken into account. A $50m issue at 7% is $3.5m annually (earnings and cash), which is much cheaper than even a 5c quarterly common.
But I'm against any idea of a substantial tender at $8 per share, which is in fact what Hillson Financial - you perhaps? - proposes, which is bad capital management in light of newbuilding and debt commitments and the fact that the money was raised at $10 per share.
I hope that makes sense. Finally, yes, I conclude by saying that those looking for income will indeed swap out, leaving the common to other types of investors.
Thank you.
I thought that Navigator got extremely good pricing in its IPO but it is a good, responsible company. Their segment of the market remains strong but the 20-22k cbm segment will also see high deliveries in the future. I will read your article.
They did, up until Q1 2009.
Check Euronav's SEC registration statements at for extensive reporting of 9M 2014 and previous years in accordance with U.S. requirements and more. Presumably they will update them immediately after Q4 announcement in February and continue to pursue the listing.
As the author notes, breakeven numbers include a very heavy depreciation load (as Euronav has a unique depreciation schedule 20 years with zero residual value). I must say that the U.S. public simply doesn't care about depreciation and Euronav's numbers will suffer compared to the publicists at say NAT or the Navios entities (DHT sobered up some time ago and uses 20 years to scrap value).
To the Investment Doctor - as the comment above says, you may be double counting the effect of lower bunker prices: use of Time Charter Equivalents is a matter of convenience, lower bunker prices simply increase the TCE, as indeed they decrease the voyage costs (spot voyages are paid lump sum on the basis of Worldscale rates). On the other hand, Euronav will indeed save some $10m in opex compared to last year due to the USDEUR rate.
But yes, I also look forward to all cylinders firing, a U.S. listing and hopefully another 40% - keep up the good work!
Well, it is only fair to comment on bad picks, rather than let them discreetly go into that good night.
Oil continued falling, offshore budgets are cut, shareholders exit in an illiquid market and Farstad ended up below NOK40. Book and market values for its assets are meaningless if the assets can't find work. They are in a better position that most, if not all, Norwegian OSV owners, with relatively limited newbuilding exposure and again, relatively OK gearing ratios. Unfortunately, one doesn't make any profits from investing in the safest in a sector that sucks. Is it still my pick in the carnage? Probably yes.
Will be nice to read your articles. Floating NAP at whatever price was a triumph for NNA which despite the fanfare was (and probably still is) going nowhere, crippled with huge finance costs and a bloated share count. They will trumpet the deal tomorrow.
It just shows that the U.S. markets will even accept an MLP owning widgets, as long as you declare that the widgets will be subject to backstopped service contacts with guaranteed revenue. People like them, banks too, so why not.
Author, you base your adapted "intrinsic value" calculation on a theory one should disregard EPS in favour of "operating surplus" (a fabricated metric only MLPs use) because EPS includes "tax" depreciation. Someone tells you that this is illogical since there is no tax depreciation but GAAP depreciation (and in fact at 25-years straight line what NMM uses is quite lower than real economic depreciation) and tries to make the point that it is even more absurd as NMM operations do not pay any taxes in the first place. Instead of reconsidering you say it's not important anymore, and want to use discounted cashflows. Just try it then using current and projected cashflows (and scrap the vessels at the end).
Intrinsic value and MLP-type financing vehicles are incompatible concepts in my view.
As to NMM itself, it barely covers its distribution, parent NM is currently forced to subsidize the charters when they roll off in order to keep the show running and perhaps people are catching up to those facts. But this is besides the point.
To clarify, some of ITCL's subsidiaries (Windsor) are in Ch11, with a $5m loss to Frontline, some others (CalPetro) are in negotiations to liquidate with zero equity to FRO as best case scenario, and the remaining ones (Golden State) are done for after the sale of the Ulriken, with another $13m loss. Total, a minimum $20-25m hit to Frontline's Q3 right out of the block, adding to the current $60m equity hole. This is before operation and possible further impairment losses, as the leased-in fleet ages badly.
Why would anyone buy hoping that a restructuring would attribute value to current shareholders? What IS that value knowing that the only purpose of continued listing is to access the market via the ATM and further support SFL?
Doctor, pricing 10 million shares at EUR8.70, which is basically current book value (not even NAV) doesn't look bad.
The only Japanese VLCCs that I can immediately associate with Euronav are the remaining Maersk bareboat-chartered H-class. The company has starting using U.S. language in documents and releases, selling itself much better (what a change from the awkwardly direct press releases of the past!) and I think that the Q2 loss will not hit the share price, especially if rates continue to stabilize. With a spike before winter hopefully everyone can cash out with a U.S listing (and pay off the usurious bond).