My my. Just one year ago the only regular analysts calling in (at risk to to be insulted by Harry should they have a not-so-clever question) were long-time shareholders such as Milwaukee. Not only are all the remaining shipping analysts now pouring in (they also helped with the secondary) but also Harry seems to keep his calm.
Later in 2013/early 2014 Exmar/Teekay and Wilbur Ross will bring their medium LPG ships to the US exchanges. Stealthgas is doing quite well anyway in its smaller and more protected sector but the noise will provide an additional lift. The most important point is that Harry doesn't tunnel funds out of the business and appears intent on building his small empire the hard way (12% MLP model anyone?).
Rowan: Push Into Ultra-Deepwater Could Bring Profits To Investors [View article]
Thanks for this article. Despite what high UDW rates can bring to the table RDC does seem to be somewhat under-performing/under... Is it execution risk? I'm not sure since the company is well-capitalized with low interest cost and even if they don't get top rates they will do more than well.
So it must be the lack of a dividend and the public statement that any future dividend will be quite small. Perhaps also current low margins: comparatively they seem to have significant operating costs while their interest, depreciation and tax are managed very efficiently.
Having said that, I think a 20-30% for next year is logical target, with a number of small catalysts ahead. I also agree with the first comment that despite its balance sheet (other managements would have leveraged it to sweep the junk-bond drillers), Ralls is positioning the company for a sale and a heroic retirement. Maersk has similar assets in harsh/UDW and similar financial culture. While Maersk was looking to add new orders, they could choose to be a good match for RDC.
In 2010 I had a look at most of the reinsurers and picked Everest over PartnerRe. It seemed leaner, with less perpetuals, and I was thinking that Taranto was positioning the company for a sale. He has since stayed on, and I still believe he wouldn't mind selling the company.
I guess though that anyone buying a real reinsurer at the time (as opposed e.g to GLRE) would have done well.
Thanks for this series on reinsurers. Looking forward to your PRE article.
NMM is now entering NAT territory: operating cashflows do not cover the distribution. The consistently borrow money at 12-13% for perpetual capital and will continue to do so, with another obvious secondary within 2013, before cashflows crash further in 2014.
More than two years ago John Fredriksen said “get out of (crude) tankers”. Since then, the sector crisis has led Genmar and OSG to bankruptcy, Frontline emasculated and facing a final and perhaps lethal restructuring before summer and smaller players such as DHT, TNK and NAT obliviously issuing shares to pay imaginary dividends, making any meaningful recovery on a per share basis impossible. (At least DHT and TNK have stopped doing so, making them more attractive for new investors – NAT continues in its ponzi ways.) Tsakos seems renegotiating with its banks, and poised to jump on the MLP bandwagon: they remain an interesting idea.
But what about this blog? Compared to the initial post, Euronav did cancel their two Suezmax newbuildings (at a cost of some $57m) but did take deliver of the VLCC Alsace, paying a whopping $160m. The company continues its extreme depreciation policy – now also adopted by DHT – and did not take impairments. It avoided until now to dilute shareholders. However, Euronav did restructure its convertible bond, meaning that a bunch of new shares (25% of the current total) are now going to be available at a EUR5.65 strike price.
The one deal anchoring Euronav is its FSO operation (FSO Asia and FSO Africa in joint venture with OSG, chartered to Maersk Oil at Qatar's Al Shaheen field). With an annual revenue of some $65m over the next five years (Euronav share), and annual cash flow from operations of about $40-45m, the segment should earn about $25m annually. In the meantime Maersk Oil, will be investing $1.6b in further developing Al Shaheen and has options on extending the charters to 2020. The outstanding debt on the FSOs is $123m, easily refinanced or increased.
The crude spot market rates barely cover opex and the oversupply seems to continue. The Tankers International VLCC pool is losing vessels and market share. DNB said some time ago that Euronav is going to run out of cash this year. The stock is now below EUR3.30 for a total market cap of around $210m. Equity is still stated at $860m.
Offshore operations will support Euronav. Old VLCC are carried at very low book values and will be sold off, leaving the company as an offshore and Suezmax operator.
I had brought my cost basis at around EUR5 just before the convertible bond restructuring. The recent action in OSGIQ was a great get out of jail free card (and more, even if I closed out everything at $3.62) so I will shift the some that windfall to Euronav over the following couple of months.
Buy Safe Bulkers: Smart Management With Skin In The Game [View article]
Another good article. It even drew back in Zach Mansell! I will not repeat why I agree with most of your well presented arguments.
In my view, it is certain that there will be another small offering this spring (6-7m shares, when the share goes above $5). In contrast to previous years, however, the offering will not be used to pay the dividend (which I still insist should have been cut to zero). So it may be positive for the company, not negative this time. But after a good run, I have reduced my position.
As to impairments, I was almost sure that they would write down the two Korean vessels, which are the only ones ordered at the real top of the market and were never supported by strong charters. The rest of the fleet was bought at historical lows (the older Panamaxes and Kamsarmaxes), fairly OK prices that can be defended in an impairment test (new Japanese vessels) or expensive but supported by good charters (Pelopidas in particular).
With the demise of almost every other stock in the sector (and the transformation of many of them into scam vehicles), it seems to me that new small investors have been attracted to SB. Some volatility is to be expected this year.
Bring back the recommend button. A well-written, thoughtful and balanced article, also explaining in very simple language some basic insurance business concepts.
The impact of DAC is evident not only when you subtract all intangibles but also on their statutory accounts surplus. I had a look back in December on the basis of SA contributor Tim Meador's article but never got over the DAC, their reliance on agency networks and this multitude of financial specialty business that may be very much affected by regulation. Too bad for me, I guess.
Navios Partners: Strong Management And Fleet At 20% Discount [View article]
You should read the filings. The Aldebaran and Prosperity are owned by Japanese interests. The were under long-term charters to NM, which dropped them down to NMM, after first having secured very lucrative charter-outs.
The two charter-ins now cost NMM, on average, about 13,500 per day per vessel, per their disclosure. Once the Prosperity charter-out expired last May, the vessel was chartered by NM for 12,000+profit share (i.e. NMM is losing some 1,500 per day only). NM in employs the vessel in the short-term time charter trade, at a loss of 4,000-5,000 (for NM). It is also NM that is losing money on the Apollon, Libra, and shortly on the Aldebaran, Hope etc.
This is simply a detail in your article, but it sort of jumps out from the page.
Many other people have commented on the shipping sector downturn, much earlier and eloquently than me. I'm more interested in governance. The Navios group has taken some great strategic decisions, in particular insuring the charter-outs and playing the capital markets. But their spin is intolerable.
I wasn't ironic: I do think SB has the best operational management and best attributes in its listed sector. I also recognize the mistakes they made, in particular maintaining a very high dividend.
Settling with the Japanese and picking some good vessels from them is simply strengthening a good relationship. They will continue getting 80% Exim financing for their newbuildings and run a lean business.
I don't know about doubling, but I'm doing very fine after buying at the lows.
Navios Partners: Strong Management And Fleet At 20% Discount [View article]
Only the distribution/ROC supports the price. And only secondaries, NM eating costs, taking over vessels at above market rates and the fake MLP-tag support the distributions.
JM, you did a lot of good research only to fumble at the goal line with your conclusions (and title).
In the short-term, once the lucrative Aldebaran charter ends, the vessel will be chartered by NM at above-market levels but still well below the previous rate. The same will happen with the 1997-built Felicity in June and the Hope in August, making a total of 6 vessels subsidized by NM, with more to come in 2014. Perhaps NM will drop down one of the two remaining capesizes that haven't defaulted yet and NMM will also buy a vessel at the current low values. A secondary comes in Q3 or Q4 of 2013.
Navios Partners: Strong Management And Fleet At 20% Discount [View article]
I don't want to be harsh, but after so many articles you've written on this sector you don't seem to get it, as the Enron guy would say.
The charter-in section needs redrafting. It is NM that charters the Prosperity from NMM, making then a loss of $4k+, not the other way round. NM also charters the Apollon and the Libra from NMM, both at a loss, will charter the next expiring vessels and also currently supports NMM by paying part of its opex. (by the way, NMM is alos making a loss on the Prosperity, and will loose money on the next charter of the Aldebaran: the bemused NMM investor relations people must surely have directed you to their press release saying that the Prosperity and the Aldebaran are chartered-in at an average of 13,500 per day-and why would you care who the owner is?)
NMM is hugely overvalued by any metrics, raising money at 14% to pay back debt and distributions. NM is naturally interested in keeping it afloat and will continue to sink money in.
But Stanislav in his articles, and i, have underestimated the thirst of the u.s. investors to buy into a yield, regardless if it is a ponzu like NAT or a ROC model like NMM.
Gus Kelly, the CEO, has the consultants' tendency to use the interlocutor's first name as many time as possible - more obvious in older transcripts. He must be on the road ten months out of twelve in conferences selling the stock.
But finally AER is in an upwards trajectory and the analysts seem to like them. The market less so but it is one stock that seems able to gain another 30% by end-2013 in a flat general market.
Well, EPS will go down, the dividend should have been fully cut two quarters ago and all money should have been kept in the company. But operationally, yes the best management out there.
With a history of working together with their Japanese charterers (some years back SB paid compensation to release below-market charters, now the opposite), they now buy vessels from those same charterers at very slightly above market value.
The transcript should be cleaned up, the CEO is very interesting when talking about his trade.
Navios Acquisition: Unwinding The Spin [View article]
Well, what NNA did not advertise in its Q4 press release is its covenant breaches. However, today's capital raise http://bit.ly/YFnlEG shows that the banks are very careful and demand fresh equity.
NNA simply did not have the cash to pay the (increased) equity for its newbuildings, interest, maintain $40m cash and acceptable leverage (they don't pay management fees/opex anyway).
The question is whether $100m raised is enough. Yes and no. NNA will now raise its dividend in order to boost the share price and do another secondary in which NM can convert the intercompany debts and sell down.
StealthGas' CEO Discusses Q1 2013 Results - Earnings Call Transcript [View article]
Later in 2013/early 2014 Exmar/Teekay and Wilbur Ross will bring their medium LPG ships to the US exchanges. Stealthgas is doing quite well anyway in its smaller and more protected sector but the noise will provide an additional lift. The most important point is that Harry doesn't tunnel funds out of the business and appears intent on building his small empire the hard way (12% MLP model anyone?).
Rowan: Push Into Ultra-Deepwater Could Bring Profits To Investors [View article]
So it must be the lack of a dividend and the public statement that any future dividend will be quite small. Perhaps also current low margins: comparatively they seem to have significant operating costs while their interest, depreciation and tax are managed very efficiently.
Having said that, I think a 20-30% for next year is logical target, with a number of small catalysts ahead. I also agree with the first comment that despite its balance sheet (other managements would have leveraged it to sweep the junk-bond drillers), Ralls is positioning the company for a sale and a heroic retirement. Maersk has similar assets in harsh/UDW and similar financial culture. While Maersk was looking to add new orders, they could choose to be a good match for RDC.
Everest Re: There Is Justification For Its Discount To Book [View article]
In 2010 I had a look at most of the reinsurers and picked Everest over PartnerRe. It seemed leaner, with less perpetuals, and I was thinking that Taranto was positioning the company for a sale. He has since stayed on, and I still believe he wouldn't mind selling the company.
I guess though that anyone buying a real reinsurer at the time (as opposed e.g to GLRE) would have done well.
Thanks for this series on reinsurers. Looking forward to your PRE article.
Navios Maritime Partners' CEO Discusses Q1 2013 Results - Earnings Call Transcript [View article]
Some Thoughts on Euronav [View instapost]
But what about this blog? Compared to the initial post, Euronav did cancel their two Suezmax newbuildings (at a cost of some $57m) but did take deliver of the VLCC Alsace, paying a whopping $160m. The company continues its extreme depreciation policy – now also adopted by DHT – and did not take impairments. It avoided until now to dilute shareholders. However, Euronav did restructure its convertible bond, meaning that a bunch of new shares (25% of the current total) are now going to be available at a EUR5.65 strike price.
The one deal anchoring Euronav is its FSO operation (FSO Asia and FSO Africa in joint venture with OSG, chartered to Maersk Oil at Qatar's Al Shaheen field). With an annual revenue of some $65m over the next five years (Euronav share), and annual cash flow from operations of about $40-45m, the segment should earn about $25m annually. In the meantime Maersk Oil, will be investing $1.6b in further developing Al Shaheen and has options on extending the charters to 2020. The outstanding debt on the FSOs is $123m, easily refinanced or increased.
The crude spot market rates barely cover opex and the oversupply seems to continue. The Tankers International VLCC pool is losing vessels and market share. DNB said some time ago that Euronav is going to run out of cash this year. The stock is now below EUR3.30 for a total market cap of around $210m. Equity is still stated at $860m.
Offshore operations will support Euronav. Old VLCC are carried at very low book values and will be sold off, leaving the company as an offshore and Suezmax operator.
I had brought my cost basis at around EUR5 just before the convertible bond restructuring. The recent action in OSGIQ was a great get out of jail free card (and more, even if I closed out everything at $3.62) so I will shift the some that windfall to Euronav over the following couple of months.
I think this year's victim will be Frontline.
Why Cyprus Is Not Really A Negative For The Euro [View article]
Buy Safe Bulkers: Smart Management With Skin In The Game [View article]
In my view, it is certain that there will be another small offering this spring (6-7m shares, when the share goes above $5). In contrast to previous years, however, the offering will not be used to pay the dividend (which I still insist should have been cut to zero). So it may be positive for the company, not negative this time. But after a good run, I have reduced my position.
As to impairments, I was almost sure that they would write down the two Korean vessels, which are the only ones ordered at the real top of the market and were never supported by strong charters. The rest of the fleet was bought at historical lows (the older Panamaxes and Kamsarmaxes), fairly OK prices that can be defended in an impairment test (new Japanese vessels) or expensive but supported by good charters (Pelopidas in particular).
With the demise of almost every other stock in the sector (and the transformation of many of them into scam vehicles), it seems to me that new small investors have been attracted to SB. Some volatility is to be expected this year.
Assurant: Attractive At A 7.7 P/E? [View article]
The impact of DAC is evident not only when you subtract all intangibles but also on their statutory accounts surplus. I had a look back in December on the basis of SA contributor Tim Meador's article but never got over the DAC, their reliance on agency networks and this multitude of financial specialty business that may be very much affected by regulation. Too bad for me, I guess.
Navios Partners: Strong Management And Fleet At 20% Discount [View article]
The two charter-ins now cost NMM, on average, about 13,500 per day per vessel, per their disclosure. Once the Prosperity charter-out expired last May, the vessel was chartered by NM for 12,000+profit share (i.e. NMM is losing some 1,500 per day only). NM in employs the vessel in the short-term time charter trade, at a loss of 4,000-5,000 (for NM). It is also NM that is losing money on the Apollon, Libra, and shortly on the Aldebaran, Hope etc.
This is simply a detail in your article, but it sort of jumps out from the page.
Many other people have commented on the shipping sector downturn, much earlier and eloquently than me. I'm more interested in governance. The Navios group has taken some great strategic decisions, in particular insuring the charter-outs and playing the capital markets. But their spin is intolerable.
Safe Bulkers' CEO Discusses Q4 2012 Results - Earnings Call Transcript [View article]
Settling with the Japanese and picking some good vessels from them is simply strengthening a good relationship. They will continue getting 80% Exim financing for their newbuildings and run a lean business.
I don't know about doubling, but I'm doing very fine after buying at the lows.
Navios Partners: Strong Management And Fleet At 20% Discount [View article]
JM, you did a lot of good research only to fumble at the goal line with your conclusions (and title).
In the short-term, once the lucrative Aldebaran charter ends, the vessel will be chartered by NM at above-market levels but still well below the previous rate. The same will happen with the 1997-built Felicity in June and the Hope in August, making a total of 6 vessels subsidized by NM, with more to come in 2014. Perhaps NM will drop down one of the two remaining capesizes that haven't defaulted yet and NMM will also buy a vessel at the current low values. A secondary comes in Q3 or Q4 of 2013.
Navios Partners: Strong Management And Fleet At 20% Discount [View article]
The charter-in section needs redrafting. It is NM that charters the Prosperity from NMM, making then a loss of $4k+, not the other way round. NM also charters the Apollon and the Libra from NMM, both at a loss, will charter the next expiring vessels and also currently supports NMM by paying part of its opex. (by the way, NMM is alos making a loss on the Prosperity, and will loose money on the next charter of the Aldebaran: the bemused NMM investor relations people must surely have directed you to their press release saying that the Prosperity and the Aldebaran are chartered-in at an average of 13,500 per day-and why would you care who the owner is?)
NMM is hugely overvalued by any metrics, raising money at 14% to pay back debt and distributions. NM is naturally interested in keeping it afloat and will continue to sink money in.
But Stanislav in his articles, and i, have underestimated the thirst of the u.s. investors to buy into a yield, regardless if it is a ponzu like NAT or a ROC model like NMM.
AerCap Holdings' CEO Discusses Q4 2012 Results- Earnings Call Transcript [View article]
But finally AER is in an upwards trajectory and the analysts seem to like them. The market less so but it is one stock that seems able to gain another 30% by end-2013 in a flat general market.
Safe Bulkers' CEO Discusses Q4 2012 Results - Earnings Call Transcript [View article]
With a history of working together with their Japanese charterers (some years back SB paid compensation to release below-market charters, now the opposite), they now buy vessels from those same charterers at very slightly above market value.
The transcript should be cleaned up, the CEO is very interesting when talking about his trade.
Navios Acquisition: Unwinding The Spin [View article]
NNA simply did not have the cash to pay the (increased) equity for its newbuildings, interest, maintain $40m cash and acceptable leverage (they don't pay management fees/opex anyway).
The question is whether $100m raised is enough. Yes and no. NNA will now raise its dividend in order to boost the share price and do another secondary in which NM can convert the intercompany debts and sell down.