After an equity analyst had a crack at Navios Maritime Partners management on Tuesday over a $0.05 dividend that has not grown with profits, an unhappy investor is taking his turn.
Finance man Ned Sherwood, who once held a 5% stake in the company before dilution, took dead aim at chief executive Angeliki Frangou and not for the first time.
Sherwood has been a Navios hair-shirt since last July and renewed the attacks after Frangou told analysts her “prudent” approach warranted the status quo despite a growing fleet, profit and revenue book.
Falling further behind peers
“While shipping CEOs at Star Bulk, Zim, Danaos and others are balancing distributions and stock buybacks with their companies’ growing earnings and cash flows, Angeliki stubbornly adheres to husbanding NMM’s cash and therefore falls further behind in creating value for shareholders,” Sherwood said in a message to TradeWinds.
Navios responded to Sherwood’s critique.
“We are guided by our stakeholders’ long-term interests and focus on total return,” said chief operating officer Stratos Desypris. “Our goal is to do this by compounding our earnings potential. I also note that management’s interest are aligned with the long term interests of our stakeholders, as it owns about 7.5% of the equity in NMM.”
Navios Partners’ total return has been among shipping's best in 2021 and the last two years, he said. The company's NAV has increased by about 60% over the past six months, he said.
“We believe that in the medium term, price will rise to meet NAV,” Desypris said.
Sherwood praised Jefferies equity analyst Chris Robertson for his persistent questions on the Navios earnings call.
Robertson observed that Navios has favourable dynamics in all three of its operating sectors, $2.8bn in contracted revenue and yet maintains the nickel dividend it has had in place since mid-2020 — at a yield of less than 1%.
But Frangou cited uncertainties over global geopolitics including the Ukraine crisis as well as the company’s 22-vessel newbuilding programme, along with a desire to keep leverage low.
“We need to be prudent because we are really at the crossroads of different events. Our priorities are low leverage that will allow us to have the flexibility and to act on different opportunities,” she said.
But Sherwood was having none of it, calling her responses “a new low” and “unintelligible double-talk”.
Sherwood, based in Connecticut and Florida, is a longtime finance professional who says he has been involved with more than 100 public companies over the years but made Navios his first shipping investment in 2018.
The graduate of the University of Pennsylvania's prestigious Wharton School of Business has said Frangou's management practices are responsible for keeping the Navios share at a large discount to its NAV.
Robertson pointed up the NAV discount in his questions as well and later in a client note.
“The question is why do units continue to trade at such a steep discount to NAV and what can management do to address this,” Robertson asked.
“We believe it comes down to NMM’s focus on proving that its diversified strategy can work over the long term and across different cycles within its three operating segments, while not clearly articulating or executing on a capital return policy similar to several dry bulk and tanker industry peers.”
Navios trades at a steep 60% discount to NAV compared to dry bulk and tanker peers who trade at a 10% to 20% discount, Robertson reported.
“We believe unit holders want to see management pursue a clear plan for returning capital to unit holders,” Robertson wrote.
Desypris countered: “Because we have a mixed fleet, our stock performance, in part, will reflect some average of the constituent parts, so concluding underperformance by comparing to another company that is not similarly situated may lead to inaccurate conclusions.”
It’s a point that Sherwood has been hammering for months now. He pointed out in a February letter to Frangou that she also stands to benefit as a major shareholder.
“Your disingenuous mantra of ‘I’m building long term value’ has left you with one of the biggest fleets but one of the smallest personal net worths of your peers,” Sherwood wrote.
“Continue your mantra and stubbornness and in my opinion, your net worth and those of your shareholders will remain relatively small. Change your ways and share your wealth and you’ll join the ranks of your billionaire industry peers.”