Equity Research Analyst, Maritime sector, Drewry Maritime Financial Research

Ankush Kathuria CFA, FRM

Equity Research Analyst, Maritime sector

Maritime Sector, Equity & Credit Research

Drewry Maritime Financial Research

With no ties to other players in the shipping, finance or banking world, we provide a uniquely impartial view of the markets and companies we cover. Our parent organization, Drewry is a leading independent provider of research services to the maritime and shipping industry, employing over 100 professionals across an international network of offices in London, Delhi, Singapore and Shanghai. Combining our market-leading resources with seasoned sector expertise DFRS offers a highly differentiated and comprehensive range of investment and financial research services to lenders and prospective investors in publicly listed maritime and shipping companies. The full service of reports, supporting resources and sector orientated webinars provides our clients with the most complete picture of the organisations under coverage as is possible. We have been charting and analysing the world’s maritime markets for more than 40 years. This unrivalled intelligence and understanding provides the foundation of our research service. Our analysts have access to one of the most up-to-date, comprehensive and reliable sources of market insight and research data available today. We look at globally listed companies within the following sectors: Port Operators, Container Shipping, Container Manufacturing & Leasing, LNG Shipping, Dry Bulk Shipping and Tanker Shipping. Combine in-depth sector expertise with financial analysis focusing on over 50 stocks globally.

Equity Bottom-Up

Tsakos Energy Navigation Ltd / Equity Bottom-Up

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<strong>Attractive valuation on charter cover with potential upside:</strong> Tsakos Energy Navigation’s (TNP’s) TCE revenue for 3Q18 dropped 4.5% y/y to USD 92.6m as the average TCE rate of USD 16,547pd during the quarter was 5.1% lower than the rates realised in 3Q17. Operating expenses 3Q18 increased 7.4% to USD 53.4m from USD 49.7m in 3Q17, and adjusted EBITDA in 3Q18 dropped 17% to USD 39.2m from USD 47.2m in 3Q17. The company recorded net loss of USD 24.8m in 3Q18, compared with net loss of USD 10m in 3Q17. TNP has a fixed term employment for 74% of vessel operating days, nearly 38% of which has the provision of profit-sharing to capture market upturns. The high charter coverage will ensure the company can cover operating expenses over the next three years with ease. Additionally, provisions of profit-sharing on 19 vessels, coupled with spot exposure of 26%, provide an upside for the company in a rising market. We estimate net loss of USD 13m in 2019. However, with estimated net profit of USD 45m, the company will flip to the black in 2020, and earnings are expected to grow further in 2021. Accordingly, we reiterate our Attractive stance with a fair value estimate of USD 4.00 per share.</li></ul>


Attractive valuation on charter cover with potential upside: Tsakos Energy Navigation’s (TNP’s) TCE revenue for 3Q18 dropped 4.5% y/y to USD 92.6m as the average TCE rate of USD 16,547pd during the quarter was 5.1% lower than the rates realised in 3Q17. Operating expenses 3Q18 increased 7.4% to USD 53.4m from USD 49.7m in 3Q17, and adjusted EBITDA in 3Q18 dropped 17% to USD 39.2m from USD 47.2m in 3Q17. The company recorded net loss of USD 24.8m in 3Q18, compared with net loss of USD 10m in 3Q17. TNP has a fixed term employment for 74% of vessel operating days, nearly 38% of which has the provision of profit-sharing to capture market upturns. The high charter coverage will ensure the company can cover operating expenses over the next three years with ease. Additionally, provisions of profit-sharing on 19 vessels, coupled with spot exposure of 26%, provide an upside for the company in a rising market. We estimate net loss of USD 13m in 2019. However, with estimated net profit of USD 45m, the company will flip to the black in 2020, and earnings are expected to grow further in 2021. Accordingly, we reiterate our Attractive stance with a fair value estimate of USD 4.00 per share.

Tsakos Energy Navigation – Leverage Seems Manageable in Rising Tanker Market