Navios Maritime Partners L.P. (NYSE: NMM) is a publicly traded master limited partnership which owns and operates container and dry bulk vessels.
On May 8, 2018, the company reported its financial results for the first quarter ended March 31, 2018, during which it reported net income of $5.5 million. During the quarter, the company reinstated distributions at $0.08 per unit annually, representing an annualized current yield of about 4.0%. The company’ initial quarterly distribution of $0.02 cents per unit was payable on May 14, 2018, to unitholders of record as of May 10, 2018.
Over the past couple of years, the company has used its cash flow to solidify balance sheet and to renew and expand its dry bulk fleet. In fact, today NMM have a 33-vessel dry bulk fleet that is larger and younger, on average, than it was only a couple of years ago.
Furthermore, the company have also used excess cash flow to reduce leverage, extend debt maturities and form a container focused entity that should provide it further upside. Overall, the company has successfully established a unique growth platform in the dry bulk sector that is capable of generating significant cash flow.
As per management, since the beginning of January 2017, the container fleet increased by $1.3 million in TEU capacity but only by about 100 vessels, reflecting scrapping of older smaller units and delivery of larger ships. Forecasts for 2018 and 2019 net fleet growth are below the expected container trade growth, making it four years in a row of positive supply-demand fundamentals. The expected deliveries in 2018 to 2020 will continue to focus on over 10,000 TEU vessels with minimal growth in the sub-10,000 TEU categories. With a record low order book and sustained global economic recovery, the container fundamentals look positive going forward.
One the liquidity fronts the company bought three vessels from the beginning of the year, and it is located on the Panamax sector. The market expects, that sector has good upside potential as already the gauge had a nice run. Which is why NMM is investing in the Panamax sector. The company is expected to have around $65 million to $70 million of cash in hand by the end of June and have a nice cash cushion to make further acquisitions.
So far operating economies are concerned, the company has a high growth platform and also have a very conservative balance sheet. Among the smaller tiers, the company has one of the lowest net debt to EBITDA. Last year, it was about $3.5 million, this year, expected to be below $3 million and EBITDA to interest is about 4.5% will be this year.
Analysts tracking the stock believes that company in an upgrading cycle, supported by its promising business risk profile along with a strong balance sheet. Considering recent developments, analysts see promise in the company and believe it will provide a robust fundamental appeal to the investors as well as momentum players trading the stock. Several brokerage firms have initiated coverage on the company, and the stock currently has an average rating of “Buy” and a consensus price target of $5.50.
About the company: Navios Partners operates 38 vessels with a carrying capacity of 3.8 million dwt including 34,000 teu and an average age of 10.1 years on a dwt basis. The vessels are chartered out for an average remaining charter term of approximately two years to highly rated counterparties.
Other recent highlights:
Delivery of fleet: On May 23rd and May 9th the company announced it took delivery of the Navios Symmetry, a 2006-built, 74,477 dwt Panamax vessel and Navios Apollon I, a 2005-built, 87,000 dwt Panamax vessel respectively.
Sale of Vessels: On April 27, 2018, Navios Partners agreed to sell the YM Utmost and the YM Unity, two 2006-built Container vessels of 8,204 TEU each, to its affiliate, Navios Maritime Containers Inc. (“Navios Containers”) for a total sale price of approximately $67.0 million. The transaction was unanimously approved by the Conflicts Committee of the Board of Directors of Navios Partners. The Company is expected to recognize a book loss from the sale of the two vessels of approximately $37.6 million in the second quarter of 2018. The sale is expected to be completed by the end of May 2018.
Private Placement of Navios Containers: On March 13, 2018, Navios Containers closed a private placement of 5,454,546 shares at a subscription price of $5.50 per share, resulting in gross proceeds of approximately $30.0 million. Navios Partners invested $14.5 million and received 2,629,095 shares. Navios Partners also received 370,909 warrants, with a five-year term. Following this transaction, Navios Partners owns approximately 36.0% of Navios Container’s equity.
Long-Term Cash Flow: Navios Partners has entered into medium to long-term time charter-out agreements for its vessels with a remaining average term of approximately 2.0 years. Navios Partners has currently contracted out 72.9% of its available days for 2018, 19.2% for 2019 and 16.2% for 2020, including index-linked charters, expecting to generate revenues (excluding index-linked charters) of approximately $121.7 million, $55.5 million and $65.9 million, respectively. The average expected daily charter-out rate for the fleet is $17,561, $23,706 and $29,992 for 2018, 2019 and 2020, respectively.
First Quarter 2018 Results:
Revenue: Time charter and voyage revenues for the three-month period ended March 31, 2018, increased by $10.6 million, or 25.1%, to $53.1 million, as compared to $42.4 million for the same period in 2017. The increase in time charter and voyage revenues was mainly attributable to: (i) the increase in revenue following the acquisition of seven vessels in 2017; and (ii) the increase in Time Charter Equivalent rate per day (“TCE”) to $16,108 per day for the three-month period ended March 31, 2018, from $14,671 per day for the three-month period ended March 31, 2017.
Profitability: Net Income for the three-month period ended March 31, 2018, amounted to $5.5 million as compared to a net loss of $5.7 million for the three-month period ended March 31, 2017. The increase in Net Income of $11.1 million was due to: (i) an $8.3 million increase in EBITDA; (ii) a $0.1 million decrease in direct vessel expenses; (iii) a $1.9 million decrease in depreciation and amortization expense; (iv) a $0.5 million decrease in interest expense and finance cost, net; and (v) a $0.4 million increase in interest income.
Key risk factors and potential stock drivers:
- The company’ ability to maintain and its liquidity and continue quarterly distribution on its common units.
- The company’ operations are significantly exposed and dependent on the economic activities. A decrease in the level of China’s imports of raw materials or a decrease in trade globally could have a material adverse impact on its charterers’ business and, in turn, could cause an adverse impact on its results of operations, financial condition and cash flows.
- The company’ operational and market risk profile is also exposed to competitive pressure. Therefore, its ability to expand relationships with existing customers and obtain new customers would continue to remain a key business sensitivity factor.
- Timely deliveries of second-hand vessels. Also, If the company purchase any newbuilding vessels, delays, cancellations or non-completion of deliveries of newbuilding vessels could harm its operating results.
- Navios Partners has steadily added older vintage dry bulk tonnage at reasonable acquisition prices to maximize cash flow returns on capital. However, On the flip side, Older vessels are typically costlier to maintain than more recently constructed vessels due to improvements in engine technology. In some instances, charterers prefer newer vessels that are more fuel efficient than older vessels. Cargo insurance rates also increase with the age of a vessel, making older vessels less desirable to charterers as well.
- On Tuesday, June 5th, 2018, NMM was at $1.81, on volume of 50K shares exchanging hands. Market capitalization is $311.238 million. The current RSI is at 48.18
- In the past 52 weeks, shares of NMM have traded as low as $1.45 and as high as $2.62
- At $1.81, shares of NMM are trading above its 50-day moving average (MA) at $1.78 and below its 200-day moving average (MA) at $2.01.
- The present support and resistance levels for the stock are at $1.77 & $1.87 respectively.
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