Investment thesis
A lot has changed since we last reported on Navios Maritime Partners (NYSE:NMM) in November 2018. Coupled with the on-going trade war rhetoric, two out of three catalysts that we had outlined had not worked out, thus, pushed the stock to a new 52-week low at $0.80 a share. However, the best possible scenario concerning the share buyback and the refinancing of the Term Loan B debt have kept us invested in the stock. We have added further to the position at the current price range.
Original thesis and catalysts
We invest in NMM because we found it absurd that a company with a manageable leverage position, favorable fleet, and charter setup could be trading at 3x FCF. Yes, it comes with cryptic management, but we felt the market had discounted the negativity too pessimistically to see any positive.
We also believed that if one of the catalysts below materialized, it would push the share price back closer to its NAV of $2.50/share.
- A successful spin-off of Navios Maritime Container (NMCI), 33.5% owned by NMM. This would demonstrate to the market the clear value of NMCI and also simplify NMM as a pure dry bulk company.
- Increase of the dividend distribution above its current $13.7M level (0.02/quarter). With strong operating surplus (free cash flow equivalent) of $78M in 2018 and estimated $50M in 2019, the dividend could easily be raised. This would attract the right kind of investors in the stock, long-term investors.
- Favorable refinance of the budging long-term borrowings of $500M.
Thesis faltering
First, the intended NMCI IPO spin-off never happened. NMCI failed to raise any funding. Instead, it listed directly on the NASDAQ and spun-off 2.5% equity to NMM unitholders. After which, the stock crashed from $5/share initially to $2.40/share today, or $83M market cap.
