1 Analysts: Chase Spirito [email protected]Kent Sowell [email protected]Top Tankers NASDAQ: TOPT Industrial Sector Marine Shipping Industry favorite in growth Young, but capable management Strong demand for crude oil and petroleum products worldwide ensures maximum fleet utilization Entire fleet is comprised of double- hulled ships, a requirement of all oil tankers by 2015 TOPT has entered into a five-year profit- sharing employment agreement with Glencore SA, one of the world's largest oil traders Recently acquired 4 Suezmax tankers to be delivered by early December, 2005, financed with the Company's cash reserves and secured bank credit lines Date of valuation 11/28/05 Market Cap (millions) 364.82 52-week high 24.14 52-week low 12.50 Beta 2.139 Current Market Price per share: $13.02 Recommendation: Hold
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Top Tankers - p2.smu.edup2.smu.edu/undergrad_practicum/reports/06/hold/topt.pdf · TOP Tankers is looking to rise through the ranks of the world's shipping companies. Operating a
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Industry favorite in growth Young, but capable management Strong demand for crude oil and
petroleum products worldwide ensures maximum fleet utilization
Entire fleet is comprised of double-hulled ships, a requirement of all oil tankers by 2015
TOPT has entered into a five-year profit-sharing employment agreement with Glencore SA, one of the world's largest oil traders
Recently acquired 4 Suezmax tankers to be delivered by early December, 2005, financed with the Company's cash reserves and secured bank credit lines
Date of valuation 11/28/05 Market Cap (millions) 364.82 52-week high 24.14 52-week low 12.50 Beta 2.139 Current Market Price per share: $13.02
Recommendation: Hold
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Company Profile:
TOP Tankers is looking to rise through the ranks of the world's shipping companies. Operating a fleet of 12 double-hull Handymax tankers and 15 double-hull Suezmax tankers, Top Tankers transports refined petroleum products and crude oil on a time charter and spot charter basis for oil companies and oil traders. Eighteen of the Company's 27 tankers are be on time charter contracts with an average term of over three years with all but one of the time charters including profit sharing agreements. Founded in 2000 by its young CEO Evangelos Pistiolis, Top Tankers experienced exponential growth after purchasing eight Handymax and two Suezmax tankers with proceeds from the company's 2004 IPO. TOP Tankers' customers include Vitol (29% of revenue) and Glencore SA (15%). (Hoover’s)
Management:
Title Name Age
Chairman Thomas F. Jackson 56
President, CEO, and Director Evangelos J. Pistiolis 32
CFO and Director Stamatios N. Tsantanis 33
CTO, TOP Tanker Management George Goumopoulos
Secretary Eirini Alexandropoulou
EVP and Director Vangelis G. Ikonomou 40
COO, TOP Tanker Management Stavros Emmanuel 63
We are confident in the management team, despite the young age of its members. Each member of the team began their careers in the shipping industry in some capacity ranging from investment banking to serving in the Greek navy. In addition, each member has management experience with a variety of shipping companies in Europe and the United States allowing each of them to contribute to successful operations of Top Tankers. Performance: Purchased last year on 3/24, TOPT was added to the portfolio as a short-term play on the imbalance on demand for tankers and supply. Last year’s analysts recommended holding TOPT for only 8-12 months, as we are in the 8th month, it is apparent that the bet has not yet played out.
Comparables Top Tankers is not “best of breed” relative to its peers. However, is the firm with the greatest potential for growth in the next 5 years (based on historical numbers). During the course of 2005, TOPT has moved with its peer group, suggesting that the industry’s underperformance this year is due to macro economic factors. Many in TOPT’s peer group have instituted share buybacks, which the CEO has considered dependent of course on what is available to buy and where the stock price is. TOPT FRO TK TNP Industry
TOPT with a low P/E and high dividend yield of 6.4% makes it a definite value play. Furthermore, TOPT’s management is capable of making the coming quarter’s earnings estimates and improving EPS. Stamatis Tsantanis, CFO, commented during their Q3 earnings conference call, “we have secured approximately 66% of our estimated operating days with long-term employment contracts. At the same time, the nine Suezmaxes operating in the spot market,
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together with the profit sharing component of the time charter contracts, expose approximately 64% of the company's estimated operating days for '06 to potentially higher spot rates.” We feel that TOPT should be held at least until Q1 ’06, at that time we should reevaluate TOPT’s position relative to its competitors and its growth prospects. Frankly, the upside in holding TOPT for another 4 months outweighs a sell recommendation now.
Financials:
Income Statement Dec 04 Dec 03 Dec 02
Revenue 93.8 23.1 11.4
Cost of Goods Sold 33.0 14.4 7.9 Gross Profit 60.8 8.7 3.5