Top Tankers Inc.: A top value play
TOP Tankers Inc. (Nasdaq: TOPT)
Maroussi, Greece
52-week low / high: $3.15/$8.40
Shares Outstanding: 37.38 million
Market Capitalization: $159 million
Calling all value investors. You might be interested in a little Greek international shipping company called Top Tankers Inc. (Nasdaq: TOPT). Aside from operating in what could be the most promising sector for 2008 (drybulk), the company is deeply undervalued.
The transporter of refined petroleum products, crude oil and other commodities trades at a discount to the industry. On a trailing price-to-earnings basis the company trades at 6.58 times, compared with 14.38 for the industry group. On a forward P/E basis, the small cap currently trades at a cheap 8.8 times.
Aside from valuation, another metric value investors look for are strong fundamentals. On a fundamental basis, the company currently remains a watch as it’s not fundamentally sound. For the nine months ended Sept. 30, 2007, the company careened to a net loss of $11.64 million, or $0.34 per share, compared with net income of $11.93 million, or $0.37 per share, for the nine months ended Sept. 30, 2006. Revenue for the nine months ended Sept. 30, 2007 sunk 17% to $200.47 million from $242.25 million for the first nine months of 2006.
Voyage revenues for the first nine months also trailed, down $200.47 million, compared with $242.25 million recorded in the nine months ended Sept. 30, 2006.
Cash from operating activities was $5.83 million, down from $44.7 million in the same period last year. Cash on the balance sheet fell to $15.8 million from $29.99 million for the same nine month period in 2006.
Although the past nine months have been short of smooth sailing, the outlook is more sanguine. The company recently diversified into the drybulk business in addition to its tanker business, rendering it one of the few public shipping companies to offer a multi-sector presence. Top Tankers bought three panamax drybulk ships this summer for $222 million, which should begin contributing to earnings in 2008, according to the company. (A panamax ship is the largest vessel that can fit through the Panama Canal's locks.) Diversification into the drybulk business should offset weakness that may occur on the tanker side and will better position the company.
The supply and demand conditions for the drybulk sector remain favorable in 2008, as emerging markets, such as China, continue to quench their thirst for oil and other commodities as their economies flourish.
Bottom line, shrewd investors might want to wait for the company’s fundamentals to turn for the better. But if it’s strictly a value play you’re looking for, investors gather round.
Note: Top Tankers Inc. (TOPT) is on the “Watch List” of Growth Report, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, Top Tankers displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Growth Report portfolio at a later date.
