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Capital Product Partners L.P. (CPLP)

NasdaqGS - NasdaqGS Real Time Price. Currency in USD
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12.35+0.52 (+4.40%)
As of 2:52PM EDT. Market open.
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  • G
    George
    Yesterday's announcement of the pending sale of two of our container ships just highlighted how under valued our share price is. In the past, management has compared our performance to some of our peers, (CMRE, DAC, GSL and ATCO). CMRE is currently trading at .89 per cent of book value, DAC is 1.05 BV, GSL is 1.06 BV and ATCO is .97 BV. When management announced the share buy back I believe we were trading at approximately 36 per cent of BV. Yahoo is currently showing us at 50 per cent of BV. In my mind, management is pursuing the right course by buying back undervalued shares, BUT, because of our ample cash on hand, ( $47 million last reported), which will be soon added to when the pending sale is completed, I think the company is in position to fully reinstate the 35 cent quarterly. We'll know soon, managements decision.
  • M
    M E
    $97.6 million in gross cash proceeds from today’s sales and their market cap is only 210mil. Is the market going to notice?
  • m
    martin
    Stifel Raises PT to $16/sh for CPLP

    In their detailed text, they state that the shares would be considerably undervalued compared to peers at even $20/sh.

    Their view is that CPLP made a solid move at a market peak for vessel values. Their debt position is much reduced, cash position considerable. But they don't expect management to boost div, rather retain most of the cash for securing dropdowns from the parent at reasonable prices, and having long term secured contracts.

    __________
    Capital Product Partners announced the sale of two larger container ships that were coming off contract later this year for $195 million which is more than the partnership paid for the vessels when new and were delivered five years ago. Not only does this dramatically reduce debt ($97.6 million) which was already lightly leveraged, but it also locks in the value discrepancy between the value of the assets owned by CPLP (we estimate close to $20/unit) and the market value of the units. Our $16 target price is based on 5.5x EBITDA which is still well below comparable company levels.
  • G
    Geezer31
    Hi George. I used to own CPLP, but gave up on them forever after too many disappointments. The main problem with this type of company is that ships are a depreciating asset, and the company has to both pay out big distributions, and make and save enough capital to replace an aging fleet. They can realistically do both, it’s financially impossible. So CPLP may be good for timing a rebound in shipping, and you can collect some decent distributions while the share price rebounds from cyclical lows, but long term you can both pay out lots of cash AND have enough capital to replace an aging fleet.
  • G
    George
    A glance at the chart going back to August 07 shows clearly that this company gives serious consideration in returning value to shareholders via the payment of generous dividends.
    This is my take on a brief review of the companies action since the onset of Covid. Just prior to this event management raised the quarterly dividend from 31.5 cents to 35 cents. The virus became front and center and management played it super safe as is their nature and reduced (slashed) the dividend to 10 cents, citing the need to fund future growth by internally generated cash on hand in the event bank lending dried up. Also, I believe that 4 vessels were coming off lease over the next 6 month period and that reset rates were in question at that time. Since that time, the resets have taken place at much higher levels than anticipated by management and cash on hand is collecting nicely. My expectation was that management would raise the dividend to 20 cents per quarter during Q4 since the cost would have been $3.7 million giving them 2 times coverage for the period. Instead, management felt that the shares were seriously undervalued and that we shareholders would benefit more by a $30 million share buy back than an increased 10 cents per quarter. There is little doubt in my mind that over the long term this will lead to significantly higher dividends. My expectation is that within 6-12 months the quarterly dividend will be raised to 35 cents and that the share price will be in the $16-$20 range. $16 w/o any additional drop downs, $20 if two more vessels added to the fleet. My opinion, easily doable.
  • G
    George
    I really believe that management will have to raise the dividend to drive the share price higher, at least incrementally, say twenty cents quarterly. Twenty cents quarterly will cost them $3.8 million out of say $7.4 million net income with 2 times coverage leaving them the balance to use for the share buyback. Another possibility would be to reinstate the 35 cent dividend which would have about 1.1 coverage and use some of our ample cash on hand to fund the buy back. I think that there is a real possibility that the available cash for Q1 will exceed $8 million. In another 3-4 weeks we'll find out how the buy back has progressed. I'm not thinking it will be a big number because the stock is thinly traded thus difficult to stay within safe harbors.
  • g
    george
    I apologize for being new here, but where is the value here. I assume this is an MLP that people buy for income, but it is only paying $0.40/s/yr in dividends. I read the transcript and the ceo says it is worth double the stock price, but I ask again where is the value. He talked about not being a speculative play but being a cash flow play. Never mentioned an increase in the dividend in the near future. I realize that I have absolutely no understanding of the business here. I chase yield, but if he is right and a 100% capital gain is achievable I’m interested. I just got a mixed message from the transcript. Does anyone who has been in this play have the patience to explain it to this noob. I do hold 2 other shipping LPs but they both yield in excess of 10% and with my basis 15 and 18% yields.
  • H
    Hannu
    Net Income per common unit from continuing operations $0.38, up 23%.
    $0.10 divvy.
    30 million stock repurchase program.
    Three 5,100 TEU Container Vessels.
    Pretty good news. Hope to see some uptick 2021.
  • H
    Hannu
    From the conference call Jerry Kalogiratos (Chief Executive Officer and Director) has this to say about CPLPs net asset value: "So we have seen NAV estimates, which are also supported by the appraisals that we get for our fleet on a quarterly basis, almost double what the unit price is today. So it's a steep discount."

    If he is correct the stock could reasonably hit $20 if it gets close to NAV.
  • m
    martin
    Stress test on CPLP Div...

    No-one knows if Board will cut dividend, from the current $1.40/sh ($30M) annual.

    Their coverage ratio of 1.6 indicates some flexibility to ride thru uncertainty in their end markets. They have about $12M extra cash flow, above their costs, reserves, and div.

    They have 4 vessels needing re-charter (1 CAPE dry, 3 modern large Container), having current average hire rates of about $40K/day.

    Here is a stress test that we can easily apply to see the security of their payout.

    Assume those vessels rehire at $20K/day on average. That would reduce their annual income by $30M, or roughly equal to their current entire div payout. Even taking into account the current modest excess annual cash flow of about $12M, their div would not sustain such a stress.

    Another scenario is that the Cape is marketed for sale, with the eventual sale price eliminating the debt held on that vessel. Their 3 large container vessels recharter at $30K/day rates on multi-yr contracts - their annual revenue would decline $25M.

    That too would demand a sizable reduction in dividend.

    If they were comfortable with a minimum 1.2 coverage, then the dividend under this second scenario would be reduced by about 1/2.

    Now there are other moving parts in their portfolio, including debt re-fi at lower rates, increased COVID-related costs, charter rate adjustments for scrubber installations, etc. But those are going to be at the margins.

    It seems reasonable to assume that Board won't take he div down in increments, moves that have hurt share value and investor confidence in other MLP shippers.

    Rather they will ripe the bandaid this week, and probably cut the div by 50%, and maybe 75% if they perceive the need for excess caution around COVID economics.
  • m
    martin
    Now yielding 20%....obviously the share drop today is indicating that some investors see a div cut.

    But short of the charterers on their many long-term secured contracts looking to rescue the rates on those (quite unlikely...), their only Cape whose contract expired this month was long known to be facing either sale, or spot market rates at much lower income. There has been some strength recently in spot Container shipping rates, and they have one vessel coming off of contract in August...which too will likely see a reduced re-hire.

    But none of that is new, and those events don't necessarily entail a div cut given other factors like increased rates in their contracts after scrubber install (all done...), and their recent fleet expansion.

    The market is acting as though CPLP will be cutting div by 50%, implying a yield after cut of about 10%.
  • S
    Stas
    Dividend cut yet again? While increasing unit repurchases? All makes sense lol what a great management team!!! Lol
  • B
    Burn
    12per cent dividend, great coverage and solidified with long term contracts
  • m
    martin
    Stifel 9 June 2020 Highlight (after CPLP extended the charter terms on 2 vessels, from 2024 to 2026)

    Key Points
    • New contracts. CPLP was able to extend the charters by two years for the three vessels chartered to CMA CGM. The charter rates moved down ~$1,000/day, costing the company a bit more than $1 million a year in net income (~$0.06/unit), but as a result the charters were extended for two years, adding ~$20 million to the backlog. But more importantly, longer charters give more certainty to cash flows, which is still valuable for an MLP.
    • Akadimos. The Akadimos, previously the CMA CGM Amazon, comes off charter in June. The vessel will do a special survey but then will be chartered for 80 days starting early July. The three 9,000 TEU vessels chartered to CMA CGM are coming off multi-year charters in July, October, and February 2021. These large modern ships are the real question mark for cash flows going forward, although they are some of the best container ships in the world and should be able to garner good employment as things settle. Combined with the capesize vessel coming off charter in June, there are four vessels coming off charter in the near term, providing some uncertainty for unitholders.
    Recharters. We are assuming the vessels get rechartered, $30,000/day for the containerships. These are down from ~$40,000/day. At the reduced levels, we estimate the partnership should be able to cover the distribution at 1.5x. Although organic growth may be limited due to only building ~$5-10 million of cash a year. However, from an investor's perspective, unitholders will collect a 15% distribution plus the potential for a better valuation. While we believe the distribution is secure, a combination of inability to charter the three 9,000 TEU vessels or to a much lesser extent the capesize vessel could obviously have an impact on the long-term distribution coverage
  • H
    Hannu
    The reason for the drastic cut of the divvy seems to be that the board wants money to buy ships and grow the business, but due to the low stock value they do not wish to issue new stock, as that would lead to excessive dilution of current stock holders. Since the valuation of CPLP doesn´t seem likely to increase anytime soon, the board decided that the most prudent way to get capital for growth, would be to reduce the divvy and use the funds for organic growth. I would have preferred the higher divvy myself, but I can see how the board is thinking. In the long run they can grow the fleet, earn more and pay out more - without diluting the share holders. Probably a good move in the current market. With the retained divvy funds they can buy a couple of ships for sure, and hopefully lock them in for good rates when we have a Covid vaccine and the world economy reboots.
  • M
    Michael B
    Why is this going down so much the past 2 days?
  • G
    George
    July 6th, Cape rates $33,760. This will be my final posting on Cape rates because we only own one and I dorealize that the containers is our main course. I started the thread because each $10,500 increase in cape rates represents one additional million dollars per quarter in earnings. If in fact, we are able to lease our cape fo $33,000 instead of the expected teens, it could add almost two million in earnings per quarter to what managment has been anticipating during the last conference call. Good news for the sustainability of the dividend.
  • G
    Geezer31
    I reread the conference call presentation. I think the major concern for CPLP is the potential bankruptcy of MSC Shipping. If they go bust then the coverage would be blown, the revenues from MSC may plunge, and the company would be stuck with unused capacity at a time when no one wants shipping. The secondary concern is rechartering the four ships that come off charter in 2020. They will likely be rechartered into the short term spot market, at rates much below expectations at the start of the year. But, I think CPLP will be able to maintain the 35 cents per Q dividend even if the four ships get rechartered at reduced rates, so in this situation we just have to wait for 1-2 years for global economic activity to recover, and while we wait collect the 35 cent dividend. So as long as MSC doesn't go bust, I think the dividend may be safe, which is really what matters to me. I'm not highly confident in this conclusion, it would be great if management could confirm whether they think the 35 cent dividend is safe in the event MSC stays solvent and charter rates for the four ships are weak.
  • m
    martin
    CEO of CMRE yesterday:

    "Mr. Gregory Zikos, Chief Financial Officer of Costamare Inc., commented:

    “On the market side, laid up capacity has started decreasing, indicating improving market conditions. Demand continues to favor the larger and medium sizes, and especially ships above 8,000 TEUs. Market activity has picked up and we have chartered in total 24 ships during the quarter.

    After months of inactivity the demolition market has re-opened and, as part of our fleet renewal program, we have sold for demolition two 7,400 TEU ships which we plan to replace with younger tonnage.”
  • b
    bill
    does DSS pay a dividend