Jefferies is standing by its high regard for Danaos Corp shares, even as the container ship charter market showed signs of cooling.
The US investment bank’s shipping analyst, Omar Nokta, reiterated a “buy” rating on the company’s stock a day after the boxship owner reported a drop in its bottom line profit thanks to a $152m fall in its investment in liner operator Zim but also higher adjusted net income.
Jefferies, which has a $100 price target on Danaos’ shares and estimates $178 per share in net asset value, pointed out that the Greek company bought back $25.1m in shares during the second quarter and gave a $0.75 quarterly dividend to shareholders.
“We see Danaos shares as very attractive,” Nokta said.
Nokta also said that Danaos’ second-quarter Ebitda of $192m surpassed analyst expectations of $168m and Jefferies’ $157m forecast.
Jefferies pointed out that earnings per share for Danaos, which has 5.69m Zim shares worth $269m as of 30 June, the bank’s estimate of $5.79 in earnings per share.
Danaos also beat analyst outlook on revenue, Jefferies added.
“Higher revenues of $251m versus our $203m led to the earnings beat, with the start-up of several high-rate time charters coming in sooner than we had modelled,” Nokta wrote in a note.
Jefferies further credited Danaos with fixing the 6,500-teu CMA CGM Musset (built 2010) on a short-term charter at $152,500 per day before putting it on a three-year charter at $60,000 per day.
The bank also pointed out that Danaos found short-term charters that paid $146,500 per day for two similar ships.
“We expect new longer-term charters to be disclosed in the coming weeks,” Nokta said.
Jefferies also looked favourably upon Danaos having $332m in cash after erasing $335m in debt.
During a conference call, chief executive John Coustas said he expects owners will not keep earning the extremely high rates they have been getting for months.
“There’s no doubt that people are in general more conservative,” Coustas said on Tuesday during an earnings call with analysts.
“Nobody feels the urge to pay top of the market at this moment, and they hope that by waiting, they might be able to get the ship, let’s say, cheaper.”
At the same time, owners are reluctant to lower their rates because they are not “in distress”, he said.
“They are not prepared really to, let’s say, put their pants down as they did with the changes in the past in order just to get fixed at any rate,” he said.
“So we’ll have to see how the world situation develops.”