German owner MPC Container Ships (MPCC) has said profitable boxship sales can still be achieved despite subdued markets.
The comments came after the Oslo-listed shipowner managed to offload two 1,024-teu vessels, AS Leona and AS Lauretta (both built 2008), last month for $6.5m each to an Asian operator, beating analysts' price valuations by $400,000 per vessel.
And MPCC chief executive Constantin Baack said the price outstripped shipbroking indices by more than that.
"S&P activity...continues to be extremely thin with hardly any transactions," he told a conference call.
"The [Clarksons] index shows an asset value of $4.8m for a 10-year-old, 1,000-teu vessel, and we were able to sell these units at $6.5m each, representing a premium of 35% compared to the index. And in addition, our vessels were two years older than the benchmark here."
Baack said indices "do not accurately reflect willing buyer, willing seller scenarios.
"It shows significant upside in the company's portfolio and it also shows that there is significant upside even in the smaller assets when you look at our portfolio and our current capital market valuation," he said.
The executive added that the sales were part of an effort to de-risk its operations regarding the coronavirus outbreak.
"We have taken measures to de-risk our corona, let's say, employment exposure by chartering, for example, multiple vessels in the package deal with a major operator and also concluding early in the year charter extensions on vessels that will become or that have become open in China and the region," he said.
"We have sold the two 1,000-teu ships, as explained earlier, which also trade in Asia to partly de-risk the fleet portfolio."
The buyer of the boxship pair was said by shipbrokers to be South Korea's Sinokor Merchant Marine. Sinokor did not respond to a request for comment.
AS Leona is on charter to Hapag-Lloyd in Asia and the AS Lauretta is due to start a deal lasting a few weeks with South Korean carrier CK Line in Asia, according to Alphaliner.
Subdued charter markets
Baack said that 2019 had been impacted by subdued charter markets and fairly low utilisation, especially in the second half of 2019 due to its scrubber programme to retrofit 10 ships.
"However, we strongly believe our balanced IMO 2020 approach has been the right step, and we presently generate solid cash flows from our scrubber charters," he added.
"Fundamentals are still favourable for containerships in general and for feeders in particular, but short-term market uncertainties definitely prevail, especially also contributed by the current coronavirus situation."
The company calculates it can earn a premium of around $750 per day for its scrubber-fitted ships, based on a fuel spread between low sulphur fuel oil and heavy fuel oil of $200 per tonne.
Solid yields but weakness ahead
Baack said: "Even in a low market environment, we can generate solid yields and the scrubber vessels constitute a good foundation for a strong free cash flow generation going forward."
Fearnley Securities said it was reducing its forecast for MPCC's 2020 Ebitda by 31%, reflecting mainly its expectations of a weak first half as the industry battles volume shortfalls due to the virus.
"MPCC is able to break even liquidity wise, helped by the recent NOK 125m ($13.5m) equity offering and the sale of two vessels," the investment bank added.
Fearnley Securities is also cutting its target price on the share to NOK 28 from NOK 40, reflecting "fair steel value." But its buy rating remains unchanged.
When volumes normalise, potentially in the second half of this year, it sees improving charter rates for the company, and free cash flow yields approaching 15%.
