New York-listed Nordic American Tankers is hoping that a dismal, loss-making third quarter winds up being the bottom of the extended trough in the tanker market.
But as it waits, the Herbjorn Hansson-led shipowner is being blasted for taking "desperate measures" by a veteran analyst who has covered the company for nearly 20 years.
NAT ended the quarter with a cash balance of $32m, but this was roughly equal to the $31m in proceeds it received from conducting at the market (ATM) shares offerings during the quarter, noted Evercore ISI analyst Jonathan Chappell.
"Despite an uplifting message in the earnings release (par for the course), there are few positive takeaways from the results with a record quarterly loss in 3Q and the last 12 months now marking four of the worst five largest quarterly losses this millennium, continuing to lead to desperate measures taken by management to keep the company afloat," Chappell wrote on Wednesday in a client note.
Nonetheless, two of Chappell's fellow analysts are maintaining "buy" ratings on NAT, largely on the prospects for a long-awaited tanker market recovery.
The numbers weaken
NAT reported a quarterly loss of $44.7m or $0.27 per share. When adjusted for an impairment charge, this was reduced to $36.3m or $0.22 per share. The result fell short of analysts' consensus expectations of an $0.18 per share loss.
This deepened a loss of $10m or $0.07 per share in the third quarter of 2020. Net voyage revenue plunged to $9.3m from $37.3m.
NAT's fleet of 24 suezmax tankers earned a time charter equivalent (TCE) rate of $5,800 for the quarter, down from $7,800 in the second quarter. The rate was $25,000 per day in the year-ago quarter.
"The pandemic has lasted longer than we anticipated at the outset in early 2020," Hansson said in the shareholder letter. "The third quarter of 2021 was the low point."
NAT paid a dividend for a record 97th consecutive quarter as a public company, but this was only $0.01 per share.
And as Chappell pointed out, the payout is being maintained despite negative cash flow in poor markets.
NAT reported an adjusted Ebitda loss of $12.3m for the quarter. This too was below analysts' expectations of a $3.2m loss.
Tapping the ATM
By selling shares through the ATM — a structure in which stock is quietly sold into the market in drips and drabs over time rather than through an organised follow-on offering — NAT has in 2021 raised a total of $54.6m, nearly exhausting its $60m authorisation.
However, NAT's board authorised a new $60m ATM programme in September, suggesting the practice will continue.
The ATM proceeds have enabled NAT to pay dividends of $6.2m, repay $18.5m of debt and maintain the $32m cash balance, Chappell told clients. But it has increased share count by 13%.
NAT shares were up less than 1% to $1.92 in light Wednesday morning trading on the New York Stock Exchange as the US prepared for the Thanksgiving Day holiday break. This is about 50% below the share price at the outset of 2021.
In his client note, Chappell went so far as to suggest that NAT was using the timing of the US holiday to "bury" a record loss, saying the owner had opted on Tuesday to move up the earnings announcement by six days.
Hansson has been contacted for comment.
The reviews weren't all bad for NAT, however. Both analyst Omar Nokta of Clarksons Platou Securities and Liam Burke of B Riley Securities maintained buy ratings on the stock, with price targets of $4 and $5, respectively.
"Nordic American saw rates at a low point in 3Q21 but with fewer vessels in dry dock, an improving rate environment on higher global oil consumption, and four vessels on longer-term contracts at $20,000 per day. We are lowering our 4Q21 estimates that reflect a sequential improvement in TCE rates but a slower than anticipated recovery," Burke wrote.
