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Nordic American Tankers Limited Message Board

  • blackoutbuzz blackoutbuzz Jun 1, 2014 9:34 PM Flag

    Two more ships

    Does the price seem reasonable?

    @@@@@Nordic American Tanker acquires two Suezmax vessels at $36.5M each Nordic American Tankers announced that the company has agreed to acquire two Suezmax vessels, delivered from a top shipyard in 2005. The agreed purchase price is $36.5M each. The vessels are expected to be delivered to us no later than August. "The acquisitions will be financed from the financial resources of the company. Including the delivery of the current acquisitions, NAT will have a fleet of 22 Suezmax vessels - enhancing our dividend and earnings capacity. The acquired vessels are essentially sister ships to other vessels in our current fleet.

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    • Yes, the price is right in line with brokerage market averages.
      With a delivery of August, it looks for good timing to capitilize on spot market trends.
      I think he needs to buy one or two more.
      Herb probably has cash for another.
      The nice part about NAT ship buys is that they pay cash. No debt incurred. Financially NAT is in good shape, but this is at the expense of stockholders, as they heavily leverage shareholder equity.

      Spot market rates are up. WS hanging around 75ish, which tracks for about $20K TCE. That makes for profit. We shall see if the market holds in the aggregate.
      Interestingly, the stock price remains down even given the positive news on several angles. I think it may be due to shorters bailng out to minimize losses. This should clear up after a couple of days, and then I think if I am right, and all else holds, we should see some upward pressure on valuation. Especially as the monthly tanker reports gain circulation.

      Sentiment: Strong Buy

    • Some rough numbers: It costs about $10,000 per day in direct operating costs and $5,000 per day in depreciation costs for a Suezmax tanker (these are rough numbers). This suggests that NAT will end up with a net cash flow if prices are above $12,000 per day (including money for repairs and overhauls), and will make real money if thet total is above $17,000 per day (All-in costs). A look at the SUEZMAX day rate charts on TEEKAY suggests that the second quarter tanker rates will average about $20,000 per day. At those rates, the price of $35,000,000 would result in a positive cash flow per tanker of around $8,000 per day or a cash on cash return of about 8% - not great, but acceptable. In addition, as NAT sops up available tankers, it gains some pricing power in the spot market. Not a super strategy, but , as I said, NAT is a good company in a bad business. my buy-back point is about 8.07

      Sentiment: Buy

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