Q2 2021 Euroseas Ltd Earnings Call
Thank you for standing by ladies and gentlemen, and welcome to the Euro She used conference call on the second quarter 'twenty 'twenty, one financial results, we have with US Mr. Aristides, <unk>, Chairman and Chief Executive Officer and Mr. Tussles athlete is chief financial Officer of the company at this time all participants are in a listen only.
Mode there'll be a presentation, followed by question and answer session at which time if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced I must advise you that this conference is being recorded today.
Looking statement, please be reminded that the company announced their results with a press release that has been publicly distributed before passing the floor to Mr. Pitts HUS I would like to remind everyone that in todays presentation and conference call you overseas will be making forward looking statements. These statements are within the meaning of the federal sector.
These laws matters discussed may be forward looking statements, which are based on current management expectations that involve risks and uncertainties that may result in so if they sell it to expectations not being realized I kindly draw your attention to slide number two of the webcast presentation, which has the full forward looking statement on this.
Same statement was also included included in the press release, please take a moment to go through the whole statement and read it and now I would like to pass the floor to Mr. Tostes. Please go ahead Sir.
Yes.
Good morning, ladies and gentlemen, and welcome to our scheduled conference call for today.
Together with my staff to assist leave you so chief financial Officer.
Purpose of todays call is to discuss our financial results for the three and six months periods ended June 30 of 2021.
Let us turn to slides.
Our income statement.
As shown here.
Well the second go to those 'twenty 'twenty, one we reported total net revenues of 18 point Saline, Michigan Dawn lives and net income of $749 million.
Adjusted net income attributable to common shareholders for the period was seven 6 million or one point $12 seven basic and diluted adjust.
Adjusted EBITDA for the period stood at $10.3 million.
<unk> will go over our financial highlights in more detail later on in the presentation.
Please turn to slide four where we discuss our recent operating developments.
As previously announced on June 30th placed orders for two new building vessels of 2800 Teu at the South Korean Joe Shoen died in April at approximately $38 million each to be financed with about 60% to 65% at the time of delivery.
The two new buildings are scheduled to be delivered during the first and second quarter of 2023, respectively.
It is worth noting that these vessels are set to pursue.
Sent more fuel efficient enough seats of the same type.
We expect to be able to talk with them in about a year's time.
During the second quarter of 2021, the shareholders of the company's series B preferred shares converted all of the remaining series B shares into shares of common stock at the conversion price of 14 point of $5 per share.
As a result of the conversion you will see the issued 453044 Goldman says to the whole lives of the series B preferred says.
Following the conversion of the series B shares into common stock the company's data external Mr. Ken Donahue well into newly appointed to the board by Tennenbaum Capital Partners Zillow C. Now Blackrock, Inc. As Steve is a big directive and the recently reelected as director resigned from the.
Both in the Golden Stew Black smoking policy.
We think our case against bookings contribution during all these years you know quote.
On the chartering front.
Yeah. He was fixed in late April so the period of 23 to 25 months, it's $20000 per day, starting still meet me.
We recently fixed the E M spaces, a sister vessel to the music.
So at a minimum of 36 to a maximum of 40 months, that's been to $9500 per day, starting from August 5th which is about three and a half times higher.
We see employment.
This fixture clearly demonstrates the magnitude of the improvement in the market during the last three months.
We have also just announced a new time charter contracts for our container vessels motto vessel. Among this be a 2000 and HD you vessels built in 1998 for the period between the minimum of 36 to a maximum of 40 months at the daily rate of 27000.
But they.
The new rate, which is more than four times higher than the vessels, causing says debate will commence on or about October six 'twenty 'twenty one to October 15th 'twenty 'twenty one after the vessel completes its upcoming dry docking.
On the operations front, we would also like to highlight three received the proceeds of the claim award related to the sale of our motor vessel melodious beef was to get up in March 'twenty 'twenty that initially failed due to the Covid covid.
19 related to the <unk>, which resulted in net proceeds of about $1 million. The vessels of course was subsequently sold to another buyer within Q2 'twenty three.
Yeah.
There were no dry docks during the second quarter.
Please turn to slide five where you can see how carbon fleet profile.
You'll see US fleet currently consists of 14 vessels, including nine feed this in five intermediate containment guy views with approximately 540000 deadweight tons and 42000 Teu capacity.
The weighted average age of the fleet guidance leaves about 16.2 years in Teu terms.
After the delivery of the last two vessels that we over the last two months Ulysses fleet will grow to a total of 16 contain the seats. The Booksmith 613000, deadweight and 48000 Teu capacity.
Slide six shows our vessel employment.
As you may see covenants for the second half of 'twenty 'twenty, one stands at 92% and they contracted EBITDA is $28.2 million daus.
But 'twenty 'twenty two we have all of it because it was 62% of the rest of the days that they couldn't taxes EBITDA level of about 41, and a half million dollars.
In 2023.
Coverage stands at 53% and contracted EBITDA that stood at $9.4 million.
We also have three vessels opening up with softness within the remaining of the year and we intend to gradually fix them as they open up always with a focus on staggered time charters and yours.
Our books tableau to extend the charter equivalent rate for the next to cope with this stands at about $70000 per day.
$20000, $21000, and 24000 and $400 a day for 2022 and 2023, respectively.
We expect the three vessels coming up food exhausted within the year to be fixed it still higher prices and thus push these averages.
Hi is highest.
Please turn to slide days, so there's a view of how the market felt during the second quarter to date.
What's gonna be inferred from the Charles is that the containership charter rates have continued unabated and morpheus fully that absolute pause that started in the fall of last year and have reached all time highs.
This slide speech fluid says.
In the midst of last year. Despite of seaborne trade H was initially viewed as a short term reaction to a keystone demand shock caused by the other stages of the pandemic and then Shooing stoking.
However, this increased demand and the logistical bottlenecks that resulted from the southern seats have extended hated the problem and led to disappointing lack of capacity and a consequence of the rate increases.
The market has continued to strengthen and for the last year. The twice weekly politics index has risen on every single evening.
This is clearly reflected as we turn to slide nine where we give a bird's eye view of the general contain the market for the second quarter to date, starting with this phase broke it.
As shown in the table time charter rates across all segments skyrocketed over the past 12 months.
The reach to the all time highs just described.
Well all vessel sizes, one year time charter rates as of August 'twenty 'twenty. One has at least doubled from the figures seen in Q1 'twenty 'twenty, one just a few months ago.
Yeah I live in second hand price index rose on average by about 52% in the second quarter 'twenty 'twenty, one over the first quarter of 'twenty 'twenty one.
But I think if he says violate the close at different age groups with the edge devices and can be seen by up to 300%.
During the second quarter, New building prices increased by approximately 10% in Q2 'twenty 'twenty one on the back of steel prices being on the rise and so they seem to just for new buildings on the back of the container ship market space.
The inactive containership fleet currently is at the end of July 'twenty 'twenty, one stands at about 120000, Teu approximating 5% of the fleet. The majority of which is dependent controlled steel sanctions vessels and the vessels that was neighborhood reactivate.
Let me remind you that just a year ago. When you meet the May 'twenty 'twenty, they negative fleet stood at $2.4 million Teu.
So that sort of the reversals of fortune.
The number of vessels scrapped the covid used in Q2, two only city seats of 1800.40 D. U. Despite scrap prices that increased to about $600 per lightweight ton due to the high demand for Steve.
Total number of vessels scrapped year to date amount to just 13 seats approximately 10000 Teu.
On the whole in Q2.2021, the fleet grew by one 8% without the scopes accounting so the island of Activations.
What are the idling et cetera.
What in the lean, but perhaps a reasonably as apparently there is a lack of ships in the water.
Look the significantly increased with many large containership new orders haven't been placed.
The order book currently stands at 21, 3%.
About 11% to just six months ago.
Please turn to slide 10.
Local if it got really continues at a solid pace, but the new guidance of Covid 19 has created sofa or uncertainty.
The latest forecast indicates a downward revision in the Asian, developing economies and then any kidney useful advanced economies, reflecting the diverse economic prospects across countries.
Well the one hand, we have the developed countries with improved credit metrics and additional fiscal support that's cut back just to vaccines and you can look forward to more normalized economic activities.
Why is developing countries are still lagging behind with the worsening pandemic dynamic and tied to the financial conditions. That's me sits back the recovery.
According to the latest stay in MRF fourth guest of July the global economy is still deep to climb at 6% in 2021 unchanged from April 'twenty 'twenty, one with offsetting of the visions, though.
The loss picks for the emerging market and developing economies has been marked down for 'twenty 'twenty, one, especially for emerging Asia.
By contrast, the focus for advanced economies is revised upwards.
Global growth for 'twenty 'twenty, two was a gated by 45% to 449% that I, having lives leave from the focused upgrades over the advanced economies and particularly the United States, which is expected to grow by four 9%.
China, and India, and India is expected to grow at a reasonable pace of five 7% and eight 5% respectively.
But 'twenty 'twenty Citi global growth is expected to be around and see in the hospital setting which represents a still healthy level.
Looking at Containerized trade and based on Clarksons projections for 'twenty and 'twenty, one we expect a significant uptick in demand growth of six 6% for this year.
'twenty, two and 'twenty City Clarkson expects contained a nice way to grow at the moderate pace of people at 3% and three 5% respectively.
Absolutely I think the figures for 'twenty 'twenty two on the low side, if global GDP growth is through honesty, I am if projected base or $4.90 per se.
Of course, all the above forecast should it be taken with a grain of salt that predicting the future is always difficult.
Could you just perhaps even harder now due to the disruption caused by Covid 19, which is vastly changing established license todays patents.
It's unknown duration interacts with the uncertainty of the geopolitical developments in global financial climate to make forecasting even more tricky.
Please turn to slide 11 to review the containership age profile and delivery schedule.
As you can see in the Containership age profile chart from the left side of the slide overall, the containerized fleet is a young fleet with EMEA, 6% of seats being above 20 years old.
However, the older vessels are mainly concentrated in the smaller sized classes warehouse sheets shop at eight.
Therefore, the growth of the fleet in the segments in which we operate it should be minimal in the next couple of years is a very few vessels have been ordered in this size range.
The right side chart shows delivery schedule of the current Containership order book, which is expressed as a percentage of the fleet.
The circle figures for 'twenty 'twenty, one to 'twenty to 'twenty five that reflects the order book beforehand, scrapping and slippage is.
I don't believe the total containership order book stands at 21, 3% of the fleet.
Nevertheless, this is still at historically low figures with despite some recent surveys.
Please turn to slide 12, where we discuss our outlook summary.
It is evident that the global recovery continues at a solid pace. Despite new variance of Covid 19, emerging which may delay, but would likely not stop economic growth.
The drivers at the neighbors this economic growth I've invented stoking and shifts in consumer spending towards the goods combined with adequate fiscal support and probe systems like seen rollouts.
In 'twenty 'twenty, one overall containership trade is expected to remain positive with most of its supply growth of four 3% and 249% in 'twenty to 'twenty two respectively.
However, the recent says you know living is likely to lead to accelerates the supply growth in 'twenty 'twenty three however.
However, we believe that new regulatory requirements effective foot from 'twenty to 'twenty three onwards will likely have a strict to the effective supplier vessels and deceased and absorbing increased new deliveries in the latter part of 'twenty 'twenty City.
As a result of the recently placed new building orders.
Well its congestion and operating inefficiencies have continued to significantly impact the container shipping markets, leading to excessive wait times and disrupting operator sketches.
These logistical bottlenecks kept because as did the new highs and container freight rates, which I expect it to at least remain throughout the second half 'twenty 'twenty one.
So it's a medium term outlook seems strongly optimistic too.
Enforced by logistical disruptions and defend crazy month.
Additionally, limited supply growth in 'twenty 'twenty, two should provide some rate support before any possible access delivered capacity comes in in 'twenty to 'twenty three.
The long term beyond 2020, so the fundamentals are quite complex with a range of factors are likely to have an impact including one the uncertainty over the potential size of the drop in rates from today's record highs in the event that demand that demand.
Start trailing back once disruptions ease up.
Two material supply pressure from 'twenty to 'twenty three onwards with me over the fake demand goes.
But and lastly city.
The new environmental regulations, which will probably result in even slower steaming by 'twenty two 'twenty three 'twenty four effectively removing capacity from the market.
Let's turn to slide 15.
The left side of this slide shows the evolution of the one year time charter rates for containers of two and a half thousand Teu since 2000.
As you can see we are witnessing the highest thought that age in the last 20 years.
According to Clarksons last week, one huge daily time charter rates for two and a half thousand Teu containership stood at 50 to $52000 per day.
The right hand side of the slide shows the vessel values in relation to historical prices since 2011.
As we can see current container supervalu scuffs significantly at least above median the leverage levels and are now the highest they have been over the last decade.
In this guidance market environment, and with container rates at the present levels or perhaps continuing to rise we expect our profitability to rise strongly as well.
Additionally, with the increased visibility of our revenues, which now extends into next year and well into 'twenty 'twenty City, you got able to bet to formulate their growth strategy.
Our broader strategy remains to become a key long term participant in the feeder into immediate containership segment as evidenced by our recent new building or this.
In addition, we continue to evaluate the addition of the uses of any accumulated earnings for the benefit of both shareholders.
<unk> is expanding and the risk measure within the collective met those via buying vessels and secure them securing them with chopsticks.
Using our listing as a potential platform to consolidate privately owned vessels or fleets has done in 2019, well be rolling out SAP holders by the aims to it means they taped and common stock dividends or buying back shares.
And with that I will now pass the floor to our CFO toxicities to go over our financial highlights in further detail.
Thank you very much.
Good morning from me as well, ladies and gentlemen.
I will now take you through the next five flights to give you an overview of our financial results for the second quarter and first half of 'twenty 'twenty, one and compare them to the same period of last year.
For that lets turn to slide 15.
For the second quarter of 2021, the company reported total net revenues of $18.3 million, representing 35, 4% increase over total net revenue of 13 and a half million during the second quarter of 2020, which was the reason.
All right, maybe the increased market charter rates our vessels churn.
And the first in the second quarter of this year.
Well not birds 14 vessels were owned and operated during the second quarter of 2021 compared to 19 vessels operated in the same quarter of last year.
The company reported net income for the period of $7.9 million and the net income attributable to common shareholders of $7.6 million as compared to a net income of $1.3 million and the net income attributable to common shareholders of $1.1 million.
<unk> for the same theory.
Well strength.
Great.
Interest and other financing costs for the second quarter of this year amounted to four 7 million compared to $1.1 million for the same period of last year.
This decrease is due to a decrease in amount of debt, we carry and the case to some extent the weighted average LIBOR rate now in the current period compared to last years.
Depreciation expenses for the second quarter of 2021 amounted to $1.6 million compared to $1.7 million for the same period of last year.
And adjusted EBITDA.
Sure.
For the second quarter of 'twenty 'twenty, one was $10.3 million a significant increase over the $4.4 million were recorded during the second quarter of 2020.
Basic and diluted earnings per share attributable to common shareholders for the second quarter of 2021 well.
Were $1.12 and one dollar and 11th chance.
Back to Covid right.
For basic and diluted calculated one six point 78 million basic shares and 683 million diluted weighted average number of shares outstanding compared.
Basic and diluted earnings per share of 20 cents for the second quarter of 2020 calculated on a five point 58 million.
Basic and diluted weighted average number of shares outstanding.
Excluding the effect on the income attributable to common shareholders for the quarter.
The unrealized loss on derivatives.
Yeah exactly their earnings attributable to common shareholders for the quarter.
Second quarter of this year would have been $1 two I've sat 12 cents per basic and diluted compared to adjusted earnings of 25 cents per share basic and diluted.
In the same period of last year during which we excluded.
I realize most of.
The amortization of below market time charters acquired and the loss on the write down of our vessels held for sale.
Usually security analysts do not include the above items in their published estimates of earnings per share.
If we look now at the numbers for the first half of 2021.
We can see that for that period. The company reported total net revenues were $32.6 million.
<unk> 12.6 person engaged but total net revenues of $28.9 million during the first half of 2020.
As a result of.
You offered a charter rates are very concerned during the period.
Well this year. Despite the fact that during the first half of 'twenty 'twenty 'twenty, one we operated 14 vessels.
And.
Bear to 19 vessels in the same period of 2020.
The company reported net income for the period was 11.7 me here and there and the net income attributable to common shareholders was $11.1 million.
This compares to a net income of $3.2 million and net income attributable to common shareholders.
It's $2.9 million for the first half of 'twenty Duane.
Interest and other financing cost for the first half of 'twenty 'twenty one.
Amounted to one 4 million compared to two point for media for that.
First half of 'twenty.
Again. This is the case you do get accused them almost dead weekend anyway.
Well if the LIBOR.
LIBOR today or a bank launched in the period compared to the same period of last year.
Depreciation expenses for the first half of 'twenty 'twenty, one were $3.2 million compared to $3.4 million during the same period of last year.
Adjusted EBITDA for the first half of 'twenty 'twenty, one was $15.9 million compared to $8.4 million.
We recorded during the first half of 2020, showing a significant increase.
The EBITA.
Year over here.
Basic and diluted earnings per share.
Triple double to common shareholders for the first half of 'twenty 'twenty one.
We're at $1.65.
Let it off on $6.75 million basic and six points 79 million.
Diluted weighted average number of Sanish outstanding compared to basic and diluted earnings per share of 52 cents for the first half of 'twenty 'twenty.
Excluding the effect on the income attributable to common shareholders for the first half of the year of the unrealized gain on derivative.
Adjusted earnings per share.
They want to common shareholders for the first six months of this year would you have been $1.58 basic and $1.57 diluted compared to adjusted earnings per share were 42 cents basic and diluted for the same period of last year during which we excluded the same things that I mentioned earlier.
The loss on derivative unrealized loss on derivatives, the amortization of the below market charters and the loss.
The write down of vessel held for sale.
Again, as I mentioned again before.
If you can and does not include these figures that's why we provide you with an adjusted earnings per share results.
Let's now move to slide 16 to review our performance in greater detail.
Our fleet performance.
User will start our review by looking first at our utilization rates for the second quarter income of 2021, and compare them and compare them to the same quarter of last year.
Our fleet utilization rate is broken down as always she for commercial and operational.
Starting first with our commercial utilization rate.
It sounds a percent during the second quarter of 'twenty 'twenty one.
As compared to 94, 6% for the same period of last year.
Our operational utilization rate for the second quarter of 2021, 99, 9% compared to 97, 7% for the same quarter of last year.
I want to remind you here.
Our utilization rate calculation does not include vessels in drydock or schedule repairs.
Such events, which occurred during the period.
Actually I mentioned earlier on average 14 vessels were owned and operated during the second quarter of this year.
And average time charter.
Equivalent rate of $14853 per day.
Compared to 19 vessels for the same period of 2020 earnings on average $9458 per day.
Our total daily operating expenses.
Management fees general and administrative expenses, but excluding drydocking costs averaged $6806 per vessel per day in the second quarter of this year.
<unk> $6120 per vessel per day for the same period of 'twenty 'twenty indicated was partially attributable to increases in insurance premiums and increased crewing costs for our vessels, resulting from difficulties go rotation due to the pandemic.
Let's now look at the bottom of the table to our daily cash flow breakeven levels presented here on a per vessel per day basis.
For the second quarter of 'twenty 'twenty one.
Our cash flow breakeven level was $10030 per vessel per day compared to 8005 founding and $12 per vessel per day. During the same period of 'twenty 'twenty with the biggest part of the increase attributed to increased loan repayments.
Let's now review our utilization rate.
And the remaining of the figures for the first half of this year.
During the first half of 'twenty 'twenty, one our commercial utilization rate was again, 100% and their parents in a utilization rate of 19, 3% compared to 96, 9% commercial and.
97, 9% operational for the same period of last year.
Well now that we own and operated 14 vessels in the first half of 'twenty 'twenty one.
In the time charter equivalent rate on average of $13526 per vessel per day compared to 19 vessels that we operated in the first half of last year everything whenever it's $9541 per vessel per day.
Our total daily operating expenses again, including management fees G&A.
But the smoothing diverting course for their first six months of this year.
I wanted to $6887 per vessel per day compared to $6003 per vessel per day for the same period of 2020.
Looking again at the bottom of the table, we can see our cash flow breakeven level for the six months this year, which stood at $9702 per vessel per day.
And in fact can be compared to $8558 for the same period of last year again.
The increase yeah.
Being the increasing longer payments.
Let's now move to slide 17.
This slide is the last guidance discussion is included to provide our shareholders and investors.
As a tool to assess the earnings potential of our fleet in the remainder of 2021 and in the full years of 2022 and 20023.
The table shown in this slide is two parts.
The first refers to are already in place contracts.
You save me. So this part of the table shows the available days profile here.
Making assumptions for the scheduled dry dockings.
Number of contracted days in each period.
Well as the differentials there too.
Which is the remaining open days for our fleet the days of our fleet will be available for <unk>.
As you can see almost all of our vessels are contracted out for the third quarter of this year, while 96% of the available days for the fourth quarter of this year or contract it out as well.
Similarly.
62% of our available days in 2022 are contracted and 33% of our available days in 2023 year contract.
Cause I contracted days.
Table shows the average contracted rate.
Which allows room by making an assumption for the operating expenses and the G&A expenses per day to estimate their likely EBITDA contribution.
Well if you open days the user of these calculator.
He has to make an assumption for the daily rate to be around which would allow him or her to estimate.
<unk> EBITDA contribution for the organization.
We provided an indicative calculation.
One used the same rate as the one of the contracted days.
One can see the effect on the total EBITDA for the remainder of 'twenty 'twenty, one 'twenty 'twenty, two and 'twenty to 'twenty three.
I would like to mention that based on the current rates. It's indicated by the buyer's market Chaucer's thing, especially if we can buy the new contacts in VIX.
Our open days, you'll turn enough of an interest rate of about $40000 per day significantly higher than what our contracted days.
These overall exercise is meant to provide tools to calculate our EBITDA.
By entering one showing an assumption however.
As far as not to observe.
But even if we just assume it's our open days will earn their age shown in the table.
Which as I just mentioned are about half of what the current market rates are.
Our EBITDA for the second half of 2021 would be Darby.
And then the EBITDA more than doubling the EBITDA over the first half of 'twenty 'twenty, one while in 'twenty 'twenty, two and 'twenty 'twenty three we will see year on year, it would be dying gauges of the order of 40% each year.
Of course, if one assumes the carbon market H.
Earnings for the open days, and the resulting EBITDA would be significantly higher.
Let's now move to slide 18 to review our debt profile.
This slide shows in the bottom part of the graph our cash flow breakeven level of expectation for the next 12 months.
The top part of the slide we can see our scheduled debt repayments over the next several years.
As you can see our loan repayments during 'twenty 'twenty, one are about four 4 million compared to seven 4.7 million. He's just for the second half of 'twenty 'twenty one.
We can see that in the dark shaded part of the chart.
And we also can see that we are.
What is scheduled to be repaid in 'twenty 'twenty, two and 'twenty to 'twenty three.
And turned it into one will also have a balloon payment of about 12 point 15 million to make collateralized.
That law and being called out their lives by four of our vessels.
We're in the process of finalizing their financing income fish balloon payment and we expect that process to be concluded soon.
In fact, I learned an appointment scheduling that we show here on this slide reflect such refinancing.
Looking further out in 2022.
There's more of a balloon payment of about 2 million to be made again collateralized by your honor for our vessels and in 'twenty to 'twenty. Three we gave a balloon payment of about 33 million.
Dollars collateralized by the remaining four vessels.
As always we will seek to refinance.
All of the ladder to balloon payments when they come to you in line with our past practice and in all the previous instances, where we're able to finance our balloon payments and extend.
They mature to foreign launch.
And finally, a quick note here on the cost of our funding before we move to review of the cash flow breakeven levels at the bottom of the table.
Yes, Steve as mentioned earlier, we have no preferred equity outstanding anymore.
Bus the cost of our non equity funding reflects only the cost of our bank debt.
Yes, we pay another margin if our bank debt of about three 6% and assuming a LIBOR rate.
<unk> three <unk>.
Percent of senior debt costs average is about three 9%.
Let's now look at the bottom of this table, where we can see our cash flow breakeven level expectation for the next 12 months in dollars per vessel per day.
From our discussion about the loan repayments are we can we have our loan repayments are to make it $1750.
Contribution from the.
The vessel they breakeven leopard.
You can make similar assumptions for the remaining components of our cash flow breakeven level that is operating expenses general and administrative expenses interest payments Drydocking course, we come up with a cash flow breakeven level for the next 12 months well just around $9600 per vessel per day.
Let's now move towards the final slide slide 19.
This slide provides highlights from our balance sheet.
Both on the base of the book value of our vessels and adjust the Tulsa.
For the for the market value of the fleet.
As of June 30.
2021, we had cash and other assets for about $17.4 million.
Why the book value of our vessels was about $95.6 million.
I think as a total book assets.
Well 113 million.
On the liability side, we capped an outstanding bank debt of 62 million and other liabilities of about 5.3 media.
Well, if we replace the book value of our vessels with them.
Market value of them are exhausted for the charters.
We can calculate the net asset value for our fleet to being around 275 million or about three 7.5 dollars per se.
Support you for such a level are also our earnings and EBITDA multiples price dynamics in enterprise relative Utah.
If indeed, they approached with those of our other containership operators.
Recently, our shares have been trading in the age of 19 to $22 per share.
Although these prices reflect a significant increase since the beginning of the year.
Still represents a significant discount.
Net asset value per share as I mentioned earlier.
Thus offering good appreciation potential.
All shareholders and good investment opportunities for other investors.
And with that comment I would like to turn the floor the floor back to our activities to continue to decline.
Thank you. So let me now open up the floor for any questions that you may have.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question Press Star two.
Your first question today comes from the line of Tate Sullivan from Maxim Group. Please go ahead. Your line is open.
Oh, Thank you good day.
I can start with the Newbuild and you announced the new builds on June 30, yet and you gave some additional information today, but will there be it sounds like will you have a deposit or those new builds in the current quarter.
Yes, we will provide that 10% to the policy within the carbon score.
Okay, and can you talk a little bit about the targeted debt to capital or targeted debt ratios post the newbuild acquisitions in one Q2, Q I mean, it still seems like with the current rates in your EBITDA projection and EBITDA at current forward rates, you'll still be well.
Maybe you'll get a little bit below where your car currently but can you talk a little bit out targeted debt ratios.
We are in club in new buildings, we're assuming we haven't started any inquiries with banks, yet, but we're assuming that we're going to finance the acquisition price by about two thirds, 65% of that debt, which will oh long delivery. So we expect to make all the Michigan the positive.
The minutes are using carballo from from our balance sheet.
Right now our our leverage ratio is very low.
If you use the adjusted market values and we are just about 20% our loan to value ratio, even if we add to the 65% that we intend to finance the new bed Newbuild.
You build vessels I don't think that there are no devaluation wouldn't go above 35%.
Okay. Thank you and you mentioned the contracts for the new builds maybe secure and in about a year or two.
Is that statement on the current market of your experience historically when you like to secure the contracts before receiving delivery can you talk about that timing. Please.
Yeah.
Yes, I mean, they leave they leave entities are in the about what 20 months.
So we would need if we wanted to fix them and now we would we would fix a lower rate than that other than to go and get age today.
So I wouldnt tension needs to wait and they may be around this time next year or two to fix those ships out, but we will see I mean, we we will play the market a good. This is one additional lies and where we can play the market didn't decide to fix when we think is the.
The optimal time.
Okay. Thanks, and last one for me before I turn it over it.
If you ordered you don't decide to order additional boats now would I do.
Do you have well you can't talk about ongoing just kept but when would that be would enter 2024 for delivery or maybe just can you talk about the general sector delivery timelines currently please.
I think it generally for feed the shapes are that they leave it is could this still be found within 'twenty 'twenty three but second half of 'twenty 'twenty two D. M. If you talk about a little bit louder soups, I think you'll probably in 'twenty to 'twenty four.
Okay.
Thanks, Thank you.
Thank you.
Thank you. Your next question comes from the line of pay far from Naval Capital market. Please go ahead. Your line is open.
Hi, Good morning nurse finished good morning taxes, I had a couple of questions on that.
The first of which is you talk about the charter potentially getting secured a year to out on the new builds.
Do you have a target capital recovery over the initial term of the charter can you just sort of talk about you know what you might be looking for as far as terms on that charter.
I don't think so Oh, I don't think I'd like to make a N any predictions now about where the market will be in a year's time I am hopeful, but I don't want to make any anecdotes.
But would you look to recover.
Say, 40% to 50% of the capital cost so pretty natural term irrespective of what the rate would be or.
Are you thinking along those lines or is it just you have so much sports Hubbard.
No not really not really I'm thinking that I will have a 20 to 25 years of life of the project to recover the project if I can make it instead of 80.456 years whatever it is we wouldn't be tremendously happy so.
But I don't know what it will be and I don't want to say something.
Okay sounds good.
And.
Would you you went through sort of your focus and your strategic sort of goals over the next year.
A couple of quarters and maybe a year.
Can you talk about the expansion potential and and what potentially are the hurdles to seeing consolidation right now is the bid ask.
You know seller expectations have to have moved up can you just give us an idea of sort of how you're thinking about consolidation right now.
Is it the is it at least kind of happening too in two ways right. One we use our liquidity to buy a new vessels of course, we would have to pay more to do by the seats, but we would be able to charter them also at the higher price and we are looking into such.
Projects continuously.
And even now as we speak and that is one way to go the other way to get always by leveraging or on the stock price and buying ships using our stock price as a guidance he does.
That we also feel this is still quite low compared to what's out and navies or EV to EBITDA with the with the bizarre thing. So I think we're not ready yet to move up that line, but our we are certainly looking at.
Vessels are worth it.
We think that we could find saw that their coverage due to support with buying at these elevated prices are today.
Okay and then when you look at your fleet.
You know like you've been very successful in locking up.
You know longer term charters on you know the latest when I said guidance.
D M honest, that's a 1998, that's all work you know three more than a three year charter coverage right now.
Where do you think about monetizing that to reinvest into newer assets or you know is is that something that you might consider.
Well, obviously and as you saw by the new build dog. That's replaced we are looking to gradually take this opportunity and.
Make the age of the fleet young good. However, we have a you know for quite some time being saying doing the last couple of years that are we have and as the fleet two which is however, technically are very well maintained and can trade there.
Everywhere and that's a representative they're not some value in the company we've been lucky that the shops in value has been realized as the Madden. This case shows us so indeed.
I think that a few of our vessels that will open up in the next six months, we'll also be jobs that the at the extremely high levels.
And Eric.
Or how do you.
What are the tradeoffs are doing longer term versus you know playing the.
The near term market and you know having the upside if rates continue to move.
Can you just talk about the process that you'll be looking at where you know like say the Oakland.
And then the three other treaters that are coming out appropriate in next six months.
Yes, but that is always a consideration that are that we have to make a do we want to go for one year or three years or four or five years out in the child's obviously the longer the period, the lower the rate, but still the rates are so high that.
Overall, we have decided to go for longer durations.
Between two N city, he is avoiding big stream for five but not even at one here and I think we will continue somehow like that you should expect to see us doing deals to speed use.
Okay, Great and then you highlighted potentially.
Reinstituting, the dividend or potentially buying stock can you prioritize that you know as we sit right here today.
What would be more attractive for you.
Right now we still feel very confident on the on the market developments and we are targeting growth more than thinking that this will give a better return to our shareholders to that end of instituting the dividend today.
Day or or or maybe even the next quota, but this is something that we consider.
Every call, but definitely reevaluate then we decide what to do so if we decided to pay a dividend I think we will want to have a dividend that continues over time as we had done in the past but are up to now I. You know we are mainly.
They're looking to into growing the company further we think the prospects are quite good to do utilize of is in Houston. This week.
Okay, Great and then.
And Tom if I could just talk to you about.
The outlet for cap our Opex. He said you know you put out the next 12 months.
Hmm.
Is that are you.
Do you think there's any potential for additional costs operating costs in place and over the next couple of quarters or are you comfortable.
The number you know with where you stand right now as far as being able to control opex.
English is the Opex estimate is based on our budget for the rest of the year than original guidance.
I'm grateful for expenses.
For the first six months of next year. So I don't have any basis to who suggested that he expects more higher opex, yeah, we do see that the insurance market being a bit tight.
And Kevin fully evaluated call the repercussions of the pandemic will affect growing another mobility costs are et.
I sat there but.
But these are the basis for the estimates put out they're part of the Opex are affected a little bit by where the vessels trade and depending on where the vessels trade we might see some influence, but it's hard to predict that.
Okay, Great and then I'm coming up on your EBITDA calculator with just a little bit higher higher number as far as just contract cover for 2022.
And I was just wondering do you given that the option on the Kid line as you know well when the money is that something you have in Ford cover. If you still are you excluding that until it stops in Texas sized.
Yeah I think.
Well in the money we should have included it or we cannot include it into the covered.
<unk> portion of the fleet.
So I hope the numbers are close with what we estimate.
Yeah.
Whatever is way below market. These are assumed to be exercised.
Okay, Yeah, I'm, just a little bit higher than I was thinking that might be the difference great. Thank you very much and look forward to seeing what happens over the rest of the year.
One thing that would be significantly higher hopefully will be the assumed rates for the open days, which we're trying to avoid making next least assumption I just saw it here the existing contracts the trades as a reference point, but clearly.
Present market levels are almost twice as high so that's should provide significant.
Hi, Europe side.
Okay.
Thank you.
Thank you.
Thank you. Your next question comes from Tate Sullivan from Maxim Group. Please go ahead. Your line is open.
Thank you just a couple of follow ups, if I may or maybe with the current contracts that you've announced.
The cash until at least to my forecasts.
You mentioned that at the Newbuild announcements potentially using both debt and equity but is your intention to use cash in addition to the debt to buy them.
Yeah, we I mean here, we target to finance, let's say 65, 60% to 65% what was the acquisition price was that typically who drove a debt and even though the vessels. So we have to make three payments before 310% payments before delivery and those would it be done.
Will be covered by funds as indicated in our balance sheet.
Okay.
And then looking.
Oh, Yes, and then looking at the ships.
Please go again right.
Looking at the remaining ships that have contracts expiring before the end of this year.
Typically the court to just getting and I apologize if I missed it I think the courts, who already had a dry dock periods in the last year.
Or do you expect something.
GAAP between the current contract ends in September and a new contract.
In the course, because it's a dry dock this year and not last year.
I need to double check that and get back.
You see this year.
That's right.
Okay. Okay. All right. Thank you have a good rest of the day.
Thanks, Dave.
Thank you I will now hand, the call back for closing remarks.
Thank you very much everybody for attending our conference call today, we will be review again named three month's time.
Thank you. Thank you everybody.
Thank you that does conclude our conference call for today. Thank you for participating you may all disconnect.
Okay.
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