Ardmore Shipping’s chief executive sought to distance the market value of the New York-listed shipowner's modern fleet from the somewhat lower products tanker sale prices in recent market transactions.
Anthony Gurnee told analysts Tuesday that transactions that have taken place in the sale-and-purchase market of late are not deals involving a willing buyer and willing seller – the kind used to determine ships’ market value.
Rather, he tied recent S&P activity in part to a market that is short of buyers because of capital constraints. Plus shipowners, particularly those with fleets outside of the tanker space, are “highly motivated” to hunt for liquidity, he said.
“I don't think the transactions happening today are really market clearing prices – willing buyer, willing seller,” he said in his first analyst conference call since Ardmore purchased six medium-range (MR) products tankers from Frontline in June for $173m.
“I think these are skewed downward because of illiquidity, and we would like to feel that we are doing the right thing by taking advantage of that.”
Gurnee’s comments came in response to quizzing by Deutsche Bank analyst Amit Mehrotra, who asked the executive to explain the company’s estimate that the net asset value (NAV) of the Frontline sextet is nearly $206m, somewhat more than the purchase price.
That estimate brings total the company’s total NAV to $828m, or $12.22 per share. The deal brings $0.22-per-share in added value from the deal, Gurnee said.
He said the deal was a strategic section for both Ardmore and Frontline. He said such strategic transactions can be done at a premium in a strong S&P market, and at a discount in a more challenging market for vessels.
“The acquisition price is very attractive and it was originated through a close commercial relationship with the seller,” Gurnee said after the Ireland-headquartered company reported better-than-expected quarterly profit. “We believe this is a one-off acquisition opportunity unlikely to be repeated in terms of price.”
Second-quarter beat
As TradeWinds reported earlier today, the New York-listed products and chemical tanker owner reported a profit of $5.5m in the second quarter, down from $7.9m in the same period of 2015.
Adjusted EPS of $0.18 was higher than the $0.13 average estimate of analysts.
Ardmore’s shares jumped 9.4% after the earnings report, closing the day’s trading session at $7.60.
