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StealthGas, Inc. Message Board

  • valueseeker890 valueseeker890 Mar 11, 2012 3:24 PM Flag

    Why is ROE so low?

    Book value is $14, yet they made only .56 in 2011.
    That is a very low return on investment, what gives?

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    • the basics:
      Voyage expense up 300% in 3 years!

      Main risk: Net income is only one time intererst expense.

      Lost $5.6M on vessel sale in 2011 - dropped net income by a third.

      Derivatives losses unexplained.

      Stock price: generally flat from 2008-2012.

      No dividend but stock bybacks.

      • 1 Reply to keilers77
      • One other thing--they overpaid for the 4 tanker ships, so historical cost is high and ROE on the assets is low.

        The derivatives are actually simpler to understand--they have interest rate swaps to fix some floating rate debts. Accounting rules require you to mark them to market, and since swap rates have fallen sharply, those swaps are under water [in other words, interest expense is much higher than it would have been without the swaps.] The swaps mature from 2013-2016, so if interest rates don't change at all, interest expense will drop. There are many many companies that have this accounting issue-- it's worth understanding.

        The foreign currency hedges were to fix their yen costs versus the new build ships. That was a very successful hedge for them. But as the last of the builds is delivered, that statement line should disappear.

        Hope this helps.

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