Nazim Macbeth

Growth, long only, value, special situations
Nazim Macbeth
Growth, long only, value, special situations
Contributor since: 2013
Prudent Analyst, thank you for your thoughtful analysis of Petroamerica.
I hold the view that the equipment failure is temporary matter, but I just recently initiated coverage of this company. Is this a one-off or has the business been plagued with operational problems?
Excellent article James!
I agree Daniel, there are multiple catalysts that can help unlock TNP's intrinsic value. The company has tremendous earnings power. Current business fundamentals will support strong earnings throughout 2015; this should push the price into the double digits. I've been long on TNP for three years and I'm very impressed with management. Plenty of upside from here provided that everyone doesn't rush to the yards.
As James said, we'll have to keep an eye on the order book, but so far owners are being rational. If they continue to show discipline, the current recovery is sustainable for two to three years.
Did anyone catch TNP's 4th Quarter conference call? I got the impression that we're in the first stage of a sustained recovery that could last three to five years.
Nikolas Tsakos made the following statement on the call:
"We are seeing a lot of time charters coming out, we have seen last year up to the end of March we had about 10 time charters reported for six months and above for VLCCs today we have 33 up to today in 2015. In last year there was almost none or two or three long-term time charters on Suezmaxes that have been close to 15 so far this year. So you will see that also the major oil companies are taking the view that we are in for at least a three to five year positive and strong period."
We need at least two to four years of strong rates to truly unlock TNP's intrinsic value. They are taking delivery of 13 additional vessels between now and 2018. All, except the LNG vessel, have accretive charter agreements in place. Market perceptions of this sector are slowly beginning to turn; if they put together 4 strong quarters in 2015, i would not be surprised to see the dividend back in the 40-60 cent range by 2016. Stock should be in the double digits by then as well.
TNP has emerged as one of the premier brands in energy transportation. I've been long on TNP for the last three years and just recently stopped adding shares. You definitely have to partner with good managers teams in the shipping business. They know how to run a shipping company and they behave like owners (because they are).
Daniel, thank you for this thoughtful analysis of the oil market. Correct me if I'm wrong, but the thesis here is that refiners will blend as much light crude as possible as they ramp up exports?
Chris, i assume you're referring to the $100M Mixed Shelf filed back in August. I'm sure Lazarus can provide additional insight, but this is a very transparent and shareholder-friendly management team. I've communicated with them directly and have been monitoring the company's progress closely.
My impression is that there is very little desire, if any, to execute equity financing at these price levels. Their capex is pretty conservative at the moment and should remain so until they move forward with developing Pathfinder.
I interpret the Mixed Shelf filing as a signal that they are serious about growth and plan to play offense in the coming years. The company has cash-flow from operations. They don't need to issue equity to keep the doors open, but to grow the business. Look at their track record, it speaks for itself.
Every investment operation requires a degree of caution. Not all the shippers are cut from the same cloth, so I wouldn't make assumptions about management based on their nationality. They greatly enhanced the intrinsic value of the company during a severe downturn in a shareholder friendly manner. All future vessel acquisitions were executed in conjunction w/profitable charter agreements that leave them with an un-leveraged vessel at the end. What more could you ask for? TNP is becoming a premium brand in the energy transportation sector. There is enough transparency to monitor the order-book and there is plenty of safety at these prices. However, i do agree with you in respect to the recent price movement. That was market volatility, but it provided an excellent entry point.
As Economics Fanatic pointed out, the low oil prices are a strong catalyst for tanker demand. TNP is under priced and this could be a factor in unlocking value.
Thank you for your article on TNP. I agree with your thesis, but even without low oil prices the tanker fleet was beginning to re-balance after years of excess tonnage. I'm keeping an eye on the order book, but TNP is my favorite company in the Crude Oil Sector. Excellent management team and there is plenty of upside from here.
Nice article! Very clear and simple proposition in my view. So the bottom line is that they will cover the remaining capex for the new deliveries with debt (accounted for in your NAV calculation). I don't see much downside at the current market price. Looks like we're just buying ships at .50 cents on a dollar, but in truth the vessels are worth more because they already have charters locked in. Seems like a good idea. What are your thoughts on the MR Orderbook going forward?
Thanks for your article. Nice work! How would you rate their research and development program?
Thank you for your article. I agree, URG is the best place to go. Very little downside at this price point. Even in the worst doomsday scenario, U.S. producers should always manage to secure some contracts domestically because they have a slight competitive advantage over foreign producers. Also, there is only so much secondary supply and excess commercial inventory. Japan or not, the market will correct. I initiated coverage of URG last year and engaged Rich Boberb, IR Director for some Q&A. I was pretty impressed; I feel that way about the entire management team and I trust them to do what's in the best interest of the shareholders.
When I bought shares of URG, I became a long-term partner of the company. This operation requires patience and discipline. Investors will have to "dig-in" on this one, but now is the time to buy; don't try to time the dilution. Just keep some dry powder on hand to buy more shares if prices fall. Like the man said, "be greedy when others are fearful".
Lazarus Investment Partners, thank you for another fine article.
Not only am I sticking to my guns with respect to URG, but I've been increasing our holdings during the pullback. I agree with the author on all points. There are clearly other investment ideas available in this space but I believe URG to be one of the best.
That said, this is a long-range investment operation that will require patience and discipline. Those who have the courage to go in strong during this period of pessimism will be rewarded handsomely.
Any rationale investor will conclude that a correction is brewing for the Uranium market. I like the doom and gloom talk though- it gives me the opportunity to buy an investment grade company at an excellent price.
Value Digger, why do you think TNP will potentially pick up another 8 LNG vessels?
"Tsakos Energy Navigation (TNP) has ordered one LNG carrier of 174,000 cbm Tri-Fuel with scheduled delivery in Q1 2016. Tsakos also maintains an option for one more and may have another eight LNG carriers constructed in the next six years"
I'm analyzing TNP and curious to know brought you to that conclusion. Any feedback would be appreciated.
Thanks!
Tetech, book value is a starting point, but NAV better reflects the economic reality for URG. First, you'll need to mark the assets to market. A DCF model was used in the Lost Creek PEA; it was valued at roughly $200M. Pathfinder on the other hand has no cash-flow. Uranium in the ground is one way to mark it to market. Ignoring all the other assets a simplified NAV calculation would look like this; $200M (Lost Creek Market Value) + $20M (Pathfinder Market Value @$2/lb) - $60M (Total Debt) = $160M
Current market price is about $150M. So it's selling at about .95 cents on a dollar. Obviously there are more assets, but that's the basic approach. Certainly Pathfinder has the potential to generate just as much cash flow as Lost Creek, but you can get a sense of the economics for the business. If Pathfinder were producing, that would put NAV in the neighborhood of $400M.
It's safe to say that URG is selling at a 20-40% discount to NAV if you were to include all the assets. What excites me is that production costs continue to fall as they ramp up production. This coupled with increasing U308 prices in the future can only increase the intrinsic value of the company.
Thank you for this excellent article!
“Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and you know your judgment is sound, act on it- even though others may hesitate or differ. (You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.) Similarly, in the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.”
Benjamin Graham
Very positive development indeed. That's down from an all in cost of $36.52/lb. Nice way to bring in the new year URG. The fourth quarter conference call should be interesting.
Christopher, it looks like this supply is coming from commercial inventory vs. warheads. Your post didn't include that last statement. I'll dig some more to get perspective on the entire supply chain. We also need to learn more about the contract terms, but this just looks like normal market behavior to me.
"USEC and TENEX signed the contract today in Washington, D.C. Under the terms of the contract, the supply of LEU to USEC will begin in 2013 and ramp up until it reaches a level in 2015 that is approximately one-half the level currently supplied by TENEX to USEC under the Megatons to Megawatts program with the mutual option to increase the quantities up to the same level as that program. Unlike the Megatons to Megawatts program, the quantities supplied under the new contract will come from Russia’s commercial enrichment activities rather than from downblending of excess Russian weapons material."
http://bit.ly/1isrVn8
Thanks for bringing that to my attention. I need to change that to a range of perhaps 60-70 cents on a dollar to make it more conservative. The goal was provide a ballpark figure.
Thanks for the positive feedback Christopher. One of the reasons I posted this thesis was to battle test it. I knew that astute analysts such as yourself could uncover some things that I missed. Thanks for that info on the Tenex contract. I'll see what I can come up with, but I was under the impression that this wouldn't come near replacing the entire HEU supply.
Thank you for those very kind words sir.
Sleazy, do you have anything to support your bearish perspective on Ur-Energy? If so, please share. I would love to read your "investment thesis".
The author is speaking to the fundamentals of both the company and the industry. He rather elegantly points out, that the current price is out of line with the fundamentals. He was also kind enough to share that excellent interview.
It's all about the exchange of ideas my friend.
This is the work of a true professional. Excellent article sir!
Simple Digressions, thank you for providing your perspective. Happy Holidays!
Thank you Jimmy. DNN is actually very high on my radar. The business is a bit more complex so it will take some time for me to present a thesis, but we should have something out mid-January. Any insight you can offer would be appreciated.
Michael, I'm going to run a comparison study which is next on my to do list. I do know that URZ and URJ negotiated contracts years ago when rates were much stronger which gives them a nice financial floor. With respect to URZ, the mere fact that they have less debt doesn't necessarily mean that they are in a stronger financial position. Insider ownership is good, but that is only one of many qualitative factors that we have to consider. I think the Ur-Energy brand has a bit more flare but until I've had a chance to study URZ's financials I have to remain neutral. You'll do just fine with URZ if you hold it. The current prices don't reflect the "fundamentals" for either business and there will be a correction at some point.
By your own calculations you list market cap @ $162.7M and total enterprise value, which i assume is NAV @$199.9M.
Did I miss something? You just proved that it is selling at a discount to NAV.
Chicane, you bring up a really good point. I was on the phone with Rich Boberg yesterday and I asked how much of the Pathfinder infrastructure could be leveraged. The disposal wells didn't come up, but I'll include that on my next list of questions to IR. We can expect capex for Pathfinder development to be around 70-80% of Lost Creek's cost.
Wait, was this a question or suggested future discussion topic?
Quite fascinating...thanks for sharing this. I'm going to dig deeper on Ablation and I'll reach out to Rich Boberg, Director of Investor Relations at URG, to get his perspective. I'll get back to you on this Rich.
Thanks for your comment Joshua. This is from the 2012 40F:
"Based upon the updated mineral resource and economic analyses (of the MMT and EMT only), the Lost Creek Property is estimated to generate net earnings over the life of the mine, before income tax, of US$283.0 million. Payback is estimated during the third quarter of the third year of operations (two years from start of construction). It is estimated that Lost Creek has an IRR of 87% and a NPV of US$181.0 million applying an eight percent discount rate. The estimated cost of uranium produced is US$36.52 per pound including all costs, with an estimated operation cost of US$16.12 per pound"
URG assigns a value of US$181.0 to the Lost Creek Project when they mark it to market. My valuation is based on the economic reality, not optimism.
Thanks Peter, we might see some Japanese reactor restarts next year so it may be prudent to open a position prior to that. But I appreciate your perspective.