- 8 crude tankers
- 26 product tankers (8 LR1 and 18 MR2 tankers)
- 4 chemical tankers
In 2014 Navios achieved its critical mass and now the company is large enough to fully utilize its modern fleet and bring value to its investors.
Despite these facts, Navios share prices are tanking. Today they are trading at around $1.70 a piece, close to their historic minimums.
source: www.stockcharts.com
I realize that the entire marine sector is in crisis (world trade is slowing down, mainly due to China) but NNA is, in my opinion, an absolute leader among its peers and sails very nicely across various world economic problems.
What is more, the company regularly pays dividends, very decent ones. At today's share prices the dividend yield stands at 11.2%. I believe that there is no material threat, which could make Navios to change its dividend policy. Let me dig a little bit into that matter.
Revenue and costs
The chart below shows revenue and costs (operating costs and cash costs), starting from 2010:
It is easily seen that Navios made substantial progress in cutting its costs. For example, operating costs went down from $19,700 a day in 2010 to $12,370 in 2015 (a decrease of 37.2%). In 2015, when charter rates went up, the company printed a nice operating profit of $138.9 million.
Economics
The table below demonstrates basic economic measures. Year 2015 shows actual figures, while years 2016 and 2017 are forecasts:
As the table shows, in 2015, due to favorable charter rates, NNA was able to cover all its cash costs plus interest expense and dividends.
The company predicts that 2016 is going to be the tougher period - charter rates should go down to $19,238 per day. Fortunately, Navios has 84.2% of available days fixed so there only a small risk that the company could report lower revenue:
source: the company's presentation
According to the picture above, if the rest of NNA fleet is rented at $4,284 a day, the company will break even. I believe that Navios will rent its vessels at much higher rates than just $4,284 per day so 2016 should be another decent year for the company.
Assuming that in 2016 the entire fleet will be rented at the average rate of $19,238 per day, Navios should have no problems with covering its cash costs, interest expenses and dividends. As the table shows, the company should book a surplus of $2,571 per day in 2016 and $5,861 per day in 2017.
Last but not least - there are no relevant debt maturities until 2019, which supports the thesis that dividends are sustainable.
source: the company's presentation
Glad I recently discovered your blog. I will watch this stock but Ii have learned overtheyears this kind of price plunge means there is bad news coming.
ReplyDeleteHarry,
DeleteThanks for nice words about my blog.
As for the price plunge - you are right if this plunge is attributable to a specific company. But here we see a different situation - generally all marine transportation stocks plunged (with a few exceptions as a few crude oil tankers companies (e.g. NAT)). NNA tanked together with the entire industry, which was, in my opinion, a typical mass psychology overreaction - the frightened mob took down even good companies.