Shares of New York-listed Scorpio Tankers climbed more than 1% on Monday after the product tanker giant announced the results of its latest stock buyback.
The disclosure sees the Emanuele Lauro-led tanker owner continue to “walk the talk” after it pledged to make stock buybacks its top priority after a prolonged period of debt reduction brought its obligations below the fleet’s scrap value.
The latest move sees Scorpio buy 756,312 shares at an average price of $78.07 each, good for a total outlay of $59m.
This follows its prior disclosure in mid-June that had acquired 641,654 shares at an average price of $78.26, totalling $50.2m.
This brings total repurchases to $109.2m since the start of June, leaving Scorpio with $140.7m remaining under an original board authorisation of $250m for buybacks.
The stock had weakened at the end of last week, falling as low as $75.61 on Friday, as investors baulked at reported progress in cease-fire talks between Israel and Hamas in Gaza.
Many view a potential truce as the beginning of the unwinding of disruptions in the Red Sea that have added tonne-miles, particularly benefiting container ships and product tankers.
Others say the two developments would not necessarily go hand-in-hand, with attacks by Houthi militants against shipping likely to extend into 2025 regardless.
The buyback disclosure on Monday pushed Scorpio’s stock north of $77 from a previous close of $76.41.
“We see these buybacks as attractive given the company’s high free cash flow generation and discounted valuation relative to NAV [net asset value], which we assess at $90/share,” said Jefferies lead shipping analyst Omar Nokta in a note to clients on Monday.
Scorpio management has told TradeWinds and investors that it strongly prefers stock buybacks to paying large regular or “special” dividends, at least as long as there is a large gap between trading price and NAV.
“If you have a reasonable discount to your NAV, then acquiring stock is the much better use of capital when compared with buying secondhand vessels or newbuildings, for starters,” said Scorpio Tankers president Robert Bugbee in June.
“And it’s better than dividends. There’s no point in paying out loads of big dividends that aren’t sustainable. You’re just at some point going to have buyers of that stock that come a cropper [suffer a setback]. Once asset values stop going up, and earnings stop going up, ships do depreciate.”
Scorpio shares have traded as high as $84.67 per share and as low as $40.34 in the last 52 weeks.
The stock is up about 22% year to date and about 81% in the past year.
Scorpio owns or lease-finances a fleet of 107 product tankers, mostly LR2s and MRs.
