Thanks uf, still thinking about it. After the VNR lesson, I decided to look for alternatives in the industry before taking commiting to a particular company.
I found out that Loan to Value covenants are affecting other shipping companies with chartered based models. For example, DAC had to suspend dividends.
The company that I like the best is GSL. They renegotiated their LTV covenant and they have no rechartering risk (first one in 2012 and new building have commited charters). Their dividend yield is 40%.
What do you think?
I had to dig a little, but this is the best discussion on ONAV that I have seen thus far. Not sure what melimarie's occupation is, but she was dead on when forecasting the divi maintained recently. She and gobirds got into a "lively" discussion with two opposing viewpoints in the below link and on the IV board. Mel was correct in her analysis most recently. This will get you started in understanding the company, debt structure, etc. Granted ONAV was trading in the 6's at this point, but the market was also trading quite a bit higher as well. With the selloff of the entire market, ONAV PPS was cut in half and hasn't recovered. There is hardly any volume in the stock which causes it to just "float" around aimlessly in the mid 3's.
I wouldn't consider ONAV very speculative. They are the only pure play product shipper and handle the shipping of refined produts, not crude. They also aren't dependent on most commodity demand like the dry bulk shippers are. Who knows which way it will go, but they are the specialist in a niche market with a young fleet and good earnings. Heck, there is only a $3 downside to go if you're wrong.
I've just been buying 2-3 hundred shares at a time whenever it falls under $3.50. I'll probably hit my limit and cease the buying once I have about 2,000 shares.
I read that too (FT.com?). My understanding is that the new vessels are already charterred so the future cash flow should be already locked in. Actually, this should be a very big plus in 2010 and 2011.
They have a very strong Cash from Operations in 2008: 40 MUSD at 100% capacity. They have to renew midyear 50% of their fleet, but a lot of the cash from operations is depreciation.
Therefore, if they do not renew them (a very pessimistic scenario, I would say it is more probable they renew at a lower rate) cash from operations at most would be reduced 50% (20M USD)
The concerns I think are more short term:
- Comparables: it is in the wrong ZIP code being pounded by the inverse ETFs
- Charters to be renewed
I spent a couple hours looking at ONAV last night. It is compelling, but I'm nervous about what I read regarding the glut of tankers coming in 2009, someone said the largest increase in 35 years. I wish they hadn't committed to acquiring 7 more. I'm thinking about it.
Regarding ONAV, I see upwardmo of VNR fame is active there too. However, from what I read, there is not much information in that board. The best was a link to this interview.
From what I found, charter rates are in the doldrums. So if they have to renew charters midyear, it is a lot of uncertainty for a Zorro's everything-is-going-to-hell-midyear scenario.
It looks like a very good company and I like their REIT-like financial strategy (LT charters, predictible cash flows, dividend payments) and I am keeping it in my short list. I much rather own RAS-prefereds in the speculative side for the moment
They do have to renew 4 charters...but from what I have read and seen throughout the industry that shouldn't be a problem...question is will they take a hit on the rate they get for those charters. There is some excellent discussion on the ONAV board (some of the more educated posters are infinite and melimarie) re the charters and the sustainability of the dividend. I did just find out the divi received is considered a non-qualified dividend, so keep that in mind if investing there...not that that would matter if the 56% yield is maintained.