Investment reports

Dry bulk owner, Taylor Maritime Investments reports strong visibility with positive outlook

Taylor Maritime Investments Limited (TMI / TMIP), the company specializing in dry bulk shipping, announces its annual results for the financial year ended March 31, 2022.
MAIN FINANCIAL POINTS
Fleet of 31 vessels with a total market value of $546 million, comprising $480 million in vessels and $66 million in assets held for sale
Average net time charter rate of $18,600
Average annualized return without leverage greater than 24%
Audited net asset value per common share of $1.74 and total net asset value of $575 million
Total net asset value return of 81.3% and total share price return of 45.5%
Pre-tax profit of $253m (operating income of $79m and fair value gains of $174m)
· Dividends paid for the period, including exceptional dividend, of approximately 10% on an annualized basis
Grindrod Shipping’s investment amounted to $125 million of the group’s net asset value

COMMENT
Taylor Maritime Investments Limited successfully completed an initial public offering on May 27, 2021, raising US$254 million (including US$160 million in cash and US$94 million in consideration shares), followed by an increase subsequent capital increase of US$75 million on July 28, 2021

· As of March 31, 2022, the Group’s fleet consisted of 31 vessels (including vessels under sales contract) with a total market value of US$546 million. Of the 31 ships, 29 were Handysizes and 2 were Supramaxes. The average age of the fleet is 11.4 years

Audited net asset value per common share of $1.74 as of March 31, 2022, providing a total net asset value (“NAV”) per common share return of +81.3% for the period from IPO (“IPO”). This was due to operating profit, increased vessel value and an attractive gain on the investment in Grindrod Shipping which appreciated significantly against the investment cost.

The Company’s common stock closed at a price of $1.42 on March 31, 2022. The Company’s total stock price return per common share was +45.5% for the period from IPO on March 31, 2022 (excluding interim dividend for the quarter ended March 31, 2022). March 2022 and the exceptional dividend which both became ex-dividend after the end of the period).

Profit for the period before tax was $253 million, including (on a transparent basis) $79 million in operating profit, after finance charges, and a fair value gain of $174 million .

The fleet’s average net time charter rate as of March 31, 2022 was approximately $18,600 per day, with an average term of six months and generating an annualized average unleveraged return of over 24%. This compares favorably to the same numbers as at the end of June 30, 2021 (the end of the Company’s first quarter), when the average net time charter rate for the fleet was approximately $15,600 per day, with an average duration of 10 months and an average annualized debt-free gross return of 20%

During the period, the Group completed the acquisition of a 26.6% stake in Grindrod Shipping Holdings Ltd., a shipping company listed on both NASDAQ and the Johannesburg Stock Exchange (NASDAQ: GRIN, JSE: GSH “Grindrod Shipping”) secured at an average price of US$17.64 per share. As of March 31, 2022, Grindrod Shipping’s share price was $25.44 per share, or $125 million of the Group’s net asset value. The Group also received two dividends of $0.72 per share in December 2021 and March 2022 (total dividends of $1.44 per share for the period) from Grindrod Shipping, representing an annualized return of approximately 16% over the investment.

Total dividends paid for the period ended March 31, 2022 amounted to 8.47 US cents, representing a dividend yield on the original issue price of approximately 10% on an annualized basis

The group has announced its commitment to achieving a long-term goal of zero carbon emissions by 2050. Substantial technological progress is a key part of this for the entire shipping industry, but the company has clearly defined near-term initiatives with incremental progress made through the period, including investments in vessel modifications, primarily upgrades during regular maintenance periods and ongoing dialogue with key customers around experimentation low-carbon fuels and energy-saving measures

Commenting on performance over the full year, Nicholas Lykiardopulo, Independent Chairman, said:
“TMI has had a dynamic and successful start as a listed investment company as evidenced by this first period of exceptional activity, with excellent levels of profitability and cash flow. Our leadership position in the Handysize dry bulk carrier segment, the workhorses of the dry bulk shipping business, continues to generate strong returns for shareholders. We remain confident that market fundamentals will lead well into 2024 and we will continue to monitor the order book for indicators on market direction beyond that timeframe.”

Edward Buttery, CEO, added:
“I am delighted that the differentiated shipping investment opportunity we have created for investors continues to deliver sustainable return and capital appreciation from our high-quality assets. Our focus will remain on managing the company with a carefully balanced charter strategy, strong liquidity and financial prudence to generate consistent earnings and attractive dividends”.

Outlook
We forecast a continued strong market for 2022 with minor bulk ton-mile growth of 2.1% and 2.7% for 2023, versus net fleet supply growth of 1.9% and -2.2% respectively and subject to actual fleet removals (Clarksons Research). The short-term impact of the war in Ukraine has led to a change in business models for shipping essential goods, both to find alternative suppliers and with Russian exports being shipped to different destinations. So far, the net change in demand appears to be negligible for our segment, once lower volumes are offset by increased ton-miles. We expect the current Covid lockdowns in China to be transitory and demand to rebound, as it has after previous lockdowns. Recognizing the uncertainty in the broader economy, we remain bullish on the Handysize segment given tighter supply over the next two years and possibly longer. The order book remains at historically low levels and a significant increase in new construction contracts remains unlikely for the time being given both cost inflation and the expectation of more profound changes in the design of ships to meet changing environmental requirements. This momentum will continue to support firm asset valuations and charter rates.
Source: Taylor Maritime