StealthGas, one of the world’s top owners of small LPG vessels, has seen period chartering activity improve recently. However, its management remains wary of any premature celebration.

“We're slightly optimistic but we don’t want to start popping champagne bottles yet. It’s a bit early,” the company’s chief executive Harry Vafias told analysts in a conference call on Thursday.

As it reported its annual results, StealthGas announced concluding new charters for nine ships and extending another one, for durations of between two months and two years. Most of these deals were concluded in February, in which period activity visibly picked up.

“This can be either attributed to seasonal factors or it could possibly be the first sign of our market’s gradual recovery,” Vafias said.

That sense of guarded optimism seems appropriate, considering that StealthGas still navigates pitfalls from a year dominated by the coronavirus pandemic.

Last year went remarkably well for the LPG carrier owner, with the company posting a sixfold rise in net income to $12m — its highest in six years.

Accounting charge

All quarters would have seen a profit on the bottom line, had StealthGas not incurred a $700,000 accounting charge in the fourth quarter on the sale of its oldest vessel. The company offloaded the 3,300-cbm Gas Pasha (built 1995) as part of a gradual fleet renewal.

The outfit reported a fourth quarter net loss of $740,000, compared with a profit of $530,000 in the same period of last year. The final three months of the year were also burdened by dry-docking costs for two vessels. Operating costs also soared by 30% as the company had to put four vessels in the spot market after B-Gas, which had the ships on bareboat charters, filed for bankruptcy last year.

The Nasdaq-listed company said it had a “good performance” in 2020, considering that upheaval. “We feel positive for 2021,” chairman Michael Jolliffe said.

This upbeat statement, however, was immediately followed by a disclaimer. “Looking ahead, we recognise that market turbulence due to the Covid-19 pandemic might last — possibly even throughout the whole of 2021,” Jolliffe said.

Much of how 2021 will play out for StealthGas depends on Europe and Asia. More than 30 of the company’s 46 LPG carriers trade in those two continents.

Covid-19 has hit demand unevenly between them. Europe was much more affected, with LPG imports dropping by 4% there last year, compared with a decline of just 0.2% in China. StealthGas also does much business in India, where millions of households use LPG for cooking.

Conservative chartering strategy

With markets balanced so precariously, StealthGas said it is pursuing a conservative chartering strategy.

“The idea is to try and fix ships in shorter charters just to protect us for the next 3 to 6 months and then, hopefully, if we see a better market, to try and fix more ships at higher rates”.

StealthGas said its increasing exposure to the spot market has put it in a good position to benefit considerably from any full-blown market recovery.

“A small $500 increase in daily spot rates will increase our Ebitda by $4m,” Vafias said.

The company's conservative stance is also reflected in its fleet development.

Early in February, StealthGas completed its ongoing capital expenditure programme by taking delivery of its last newbuilding under construction, the 11,000-cbm Eco Blizzard (built 2021).

Occasional fleet renewal moves aside, the company has no big ambitions on the sale-and-purchase front.

“We don’t have any big plans now, with things being a bit wobbly,” Vafias said.

StealthGas is keeping its options open on the shareholder front as well. Even though it has been a fan of share buybacks before, it has put any plans for a new one on the back burner.

“Today, I don't think it’s something we are going to be discussing with the board because we’re not out of the woods yet,” Vafias said.

StealthGas shares rose to a 13-month high of $3.25 apiece in New York on 16 February but that still valued the company at a paltry $120m — far below the value of its ships.

The stock has dropped to $2.94 since and is currently trading at between a quarter and a third of the company’s net asset value.

“We deem that to be very low, given both our stated profitability along with our robust balance sheet,” Vafias said.