Question: One trading day after appearing on CNBC's "Mad Money" investor show, Herbjorn Hansson's Nordic American Tankers (NAT) did which of the following:
A. Became a $1bn company in market capitalisation;
B. Traded a record 61.4m shares worth $448m;
C. Traded more shares than nine other public tanker owners combined;
D. Improved share price by 23%.
E. All of the above.
If you chose "E", you are both correct and may be in the running for a juicy shareholder dividend to be announced at NAT's next quarterly earnings.
NAT, an owner of 23 suezmax tankers, used its large retail shareholder base, the appearance on Jim Cramer's television show and the current craze over floating storage opportunities to boost its share price to $7.20 from $5.85.
The gain boosted its market capitalisation to $1.06bn from a previous close of around $860m, while the 61m shares traded was about 12 times its average over the past three months.
The latest chapter of NAT's dramatic upsurge sends its shares well beyond 200% of estimated net asset value (NAV) by investment bank Jefferies. Despite NAT's strong position, some in the tanker market still view the extent of investor interest as irrational exuberance, especially given other peer tanker options.
Companies such as Euronav, DHT Holdings and Frontline Ltd have greater exposure to VLCCs that are leading the market in hire rates and in floating storage capability as a world oil glut overruns available land facilities."Our NAV number is likely stale, but the more important metric is that NAT is at double the valuation of its peers," Jefferies' Randy Giveans said, meaning the rest of the group is finally getting to trade on par with NAV.
Steep rise
Fearnley Securities said NAT has risen nearly 200% since 20 March.
Assuming the suezmaxes could earn $70,000 per day in the second quarter, the company can distribute 44 cents for the first half, with 14 cents already declared as a dividend.
It estimates an all-in cash break-even of $17,000 per day.
"The company has recovered miraculously from a tough spot in late 2017/early 2018 and is expected to hold about $120m of cash by end of June," Fearnley said.
Fearnley is estimating floating storage requirements of up to 100 VLCCs in May.
"Should the market return to the 2018 lows, we estimate the company would burn a moderate $30m per year."
Fearnley continues to see decent activity, with Unipec being especially active late last week and on Monday.
"Rates are holding up, for now, although expectations are for weaker rates in the coming weeks," it added.
On the demand side, April is expected to be the low point as Europe and the US look to lift lockdowns in May and June, it said.
TEN rises too
Elsewhere in the tanker sector, Tsakos Energy Navigation (TEN) was having its own banner day, rising 16%. The Greece-based owner of a mixed tanker fleet surged to $4.02 on about fourfold its usual turnover.
Tsakos has been at the other end of the valuation spectrum from NAT.
"TEN was and still is the cheapest compared to NAV, with a solid dividend and lots of profit sharing on its time charters," Giveans said of the owner.
The tanker gains came as oil continued its historic price weakness. The world standard Brent crude was down 6.8% to $19.99 per barrel, while West Texas Intermediate fell 24% to $12.93 per barrel.
Other gainers included Teekay Tankers (up 11%), DHT Holdings (8.7%) and Euronav (7%). On the clean products side, Ardmore Shipping gained 12% and Scorpio Tankers 7%.
Shipping's gains extended into dry bulk as well, with Diana Shipping up 8%, and Eagle Bulk, Star Bulk and Scorpio Bulkers all up 7%.
