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Knightsbridge Tankers Limited Message Board

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  • phughyoung phughyoung Apr 11, 2012 11:37 AM Flag

    12 P/E and 12% YLD at $ 15.50 - time to buy

    No doubt there is value somewhere. But, and bring on the screamers, I believe the dividend is in doubt going forward. They covered most of it with earnings, but a significant part of the dividend cover was provided by depreciation contributing to cash flow.

    Higher oil prices do not contribute material benefits to this stock as you can see from the recent price of both. The tanker market is oversupplied currently and the builder's book points to oversupply in the future. That will put downward pressure on tanker rents in the future.

    At least one of their charterers renegotiated a time charter to avoid defaulting on it.

    None of that looks attractive to me, so I stay on the sidelines for now, after having sold at a significant loss in December.

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    • agreed the $2 dividend is certainly in question at this point....but I think the $1.50 range is very sustainable for intermediate future (i.e. 2-3 yrs). They have made it clear they will basically pay out the cash flow .... so, depreciation, although spoken of with seemingly negative connotation in your last post, is a very real piece of the equation here

      The spot rates actually don't affect the revenues of this company as much as one might expect (even with 3 ships either on or nearing the spot market, barring future contracts) due to their existing contract structure. I won't disagree there is always litigation risk in regards to rates, but that can be said about any contract in any industry.

      I do agree there is respectable risk going forward in regards to market supply of the tankers themselves, but there are some very unique market characteristics right now as well that make purchases quite attractive, so it certainly doesn't seem unusual when viewed as part of the larger cycle

      Today is today, however, and as of right now, here is the quite positive reality:

      Certainly don't agree with the high end of the revenue estimates here on yahoo, but mid 70's to low 80's certainly seems realistic at this point, which I again reiterate, barring a relatively near term equity issuance, this stock is $21+ ....... at a minimum, if a share issuance is significantly delayed, the market is definitely over discounting the PV of the dilution.

      • 1 Reply to crustytrader
      • I said in January:

        "Co has 4 VLCCF's - 3 under contract rates and 1 on spot market; however, one contract expires April 2012 and one in August 2012.

        With day rates down 80%, renewal rates will be much lower. Thus, 2012 revenue will likely fall substantially.

        Price now at $14 with NYSE at a three year high. Unless the general stock market jumps, VLCCF should be below $10 this year - probably by mid-summer."

        We are now in April at mid-12's, half way there. Fundamentals! Not charts & guess work.

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