Shareholders in ADS Crude Carriers are getting a one-off pay out of $51m from the company's fleet sale — but could they have been expecting more?
That is the question posed by Norwegian investment bank Cleaves Securities following the Oslo-listed operation's update on its future plans on Wednesday.
The distribution to shareholders from the sale of ADS' three 2002-built VLCCs equates to NOK 19.70 ($2.18) per share, Cleaves said.
The stock price sank 5.7% in Oslo on Wednesday, closing at NOK 21.40.
Cleaves calculates ADS has $8m left in the bank and assesses its net asset value (NAV) at NOK 24.
"Since raising $58m in equity at inception in Q3 2018, the company will have distributed a total of $70m in accumulated dividends, including the expected distributions," said Cleaves head of research Joakim Hannisdahl and equity analyst Peter Michael Christensen.
A decent return?
Adding the expected $6m residual NAV after the first quarter of 2021, the total return on equity will stand at 31%, or an 11.5% compound annual growth rate (CAGR), the analysts added.
"Although a decent return, one could assume that shareholders had higher expectations for their equity return given the elevated risk and volatility associated with investing in oil tanker shipping," Hannisdahl and Christensen said.
Cleaves pointed out that ADS has been "unfortunate" when trading its vessels in the spot market, with fixtures generally missing market spikes earlier this year.
The analysts argued that if ADS had been able to trade the vessels at levels similar to the spot market average and had been able to divest the vessels at the peak of the market (at $33m each instead of $25.5m), shareholders would have been left with a 93% return and a CAGR of 30%.
Keep your shares
"Although this represents a best possible scenario, it helps exemplify the volatility of oil tanker shipping investments," Cleaves added.
The investment bank is maintaining its hold rating on the stock as the next move is awaited.
The target price is NOK 22, up from NOK 19.
ADS, with no ships currently, revealed on Wednesday that it was still eyeing new investments in shipping and would return to equity markets if the right opportunity arose.
Acquisitions may be outside the crude tanker arena, prompting a name change to ADS Maritime Holding, subject to shareholder approval.
