John Fredriksen's Flex LNG has launched a $31m share buyback to take advantage of discounted stock prices.
The New York and Oslo-listed LNG carrier company will repurchase up to 4.11m shares over the next year, paying a maximum of $10 each, to increase investor value.
The stock closed at $7.45 in New York on Thursday.
Chief executive Oystein Kalleklev told TradeWinds: "Given the Covid-19 situation, investor sentiment for the sector has not improved."
He said Flex LNG is in "great shape" delivering profit and has guided for strong numbers going forward.
"For us, buying our own new ships at the stock exchange is much cheaper than buying them from yards," Kalleklev added.
Because the vessels are all fully financed, and since they are on the water now and next year, "they provide immediate cash flow rather than tying up all the capital in yard pre-payments [over] the next couple of years".
This time last year, Kalleklev had talked of "Black Friday" share prices that allowed Singapore's BW Group to take a 1% stake in the company. BW has since increased this holding to around 4.5%.
The stock is now trading at about 45% of book value, he said.
Pareto Securities said the move showcases "additional strength after the company reinstated its $0.1 per share dividend after the impressive Q3 report".
New fleet
"We believe it makes sense given the muted share price reaction after a stellar fourth quarter guidance of [rates of] $70,000 to $75,000 per day."
Pareto said it was generally against buybacks in shipping, "but again there are always exceptions to rules", including companies with strong balance sheets and "demonstrated ability to navigate through extreme times and stay profitable".
Flex LNG has 10 modern MEGI/XDF LNG carriers on the water, with an average age of only a year, as well as three newbuildings with scheduled delivery in 2021.
It traded its vessels at cash break-even levels in the third quarter but is expecting a significant uptick in the last three months of the year.
The shipowner reported average time charter equivalent rates of $46,569 per day for the three months ending in September.
Net profit was $3.8m, up from $500,000 in the same period last year.
