Q2 utbytte

Beklager at dette her er på engelsk. Norsken min er ikke helt perfekt :)

I have been trying to figure out what the Q2 dividend might be.

The Q1 report said this:
"Backlog estimated for around 95% of vessel days in Q2 2020 booked at an average TCE per day of approximately USD 65,000".

It also talked about a break-even of USD 12,900.

So here are my calculations:
* Day rate USD 65,000 minus break-even of USD 12,900 = USD 52,100 profit per day per ship
* Three ships gives USD 156,300 profit per day total
* There are 91 days in Q2, so 95% of them is 86 days
* That gives USD 13,441,800 for Q2
* There are 23,390,294 shares
* If they pay 0 debt, Q2 gives USD 0.57 per share (but this won't happen, since they must pay some debt)
* If they pay the same debt as Q1 (USD 3.4m) then they will dish out USD 10m to shareholders, which is USD 0.42 per share

Therefore, the Q2 dividend must be between USD 0.42 and 0.57. Now, we know it can't be the full 0.57 since that was a number calculated with 0 debt repayments. It also seems that debt repayments will be less than $3.4m due to scrubbers being mostly paid for by now.

It looks to me like the Q2 dividend will be around USD 0.45 or 0.5 at the highest.

Are my calculations correct?
Redigert 19.01.2021 kl 21:07 Du må logge inn for å svare
28.05.2020 kl 10:31 2364

They are perfectly fine with me - nobody get's bull's eye anyway, I settle for 0.45-0.5 anytime!
28.05.2020 kl 10:38 2317

I agree, USD 0.45-0.5 is perfectly fine for me too! That is a yield of 18-20% on today's share price. For one quarter!

However, the reason I posted was because almost every comment I saw on this forum talking about Q2 said "jeg tipper USD 0.6 i Q2". I cannot see how it can possibly be 0.6 when I run the numbers. So I want to make sure I set realistic expectations for myself :-)
Redigert 28.05.2020 kl 10:40 Du må logge inn for å svare
28.05.2020 kl 11:03 2251

The reason why I anticipate 0.6 is because of my assumption of 3 mill $ scrubber payment i Q1. I assume this will not be the case for Q2. But hey, 0,45 $ pr share is fine with me. :)
28.05.2020 kl 11:25 2177

I can see that the depreciation has increased due to the scrubber instalation. This brings down the Q1 result some 2,8 mill $ compared to Q1 2019
09.06.2020 kl 11:23 1782

I think I made a couple of errors with my initial post, and have also since emailed the company and gotten clarification on a few things. I asked them what future loan payments would be, as this helps us answer what future dividends will be (which is the key to this share, not the share price).

They referred to the "Dividend Amortization" loan clause:

"Dividend Amortization – whereby 50% of any dividend exceeding USD 2 million in any financial quarter, USD 4 million in any financial half-year and USD 6 million in any financial year is applied towards prepayment of the Fleet Loan. Applied until outstanding loan balance is USD 27 million [...]"

I was then told this:
"Hence, future loan amortization is dependent on the amount of dividends we declare for future quarters as well as the cash balance at the end of each quarter. Since any further dividends (ie. not already announced) this current financial year will be subject to 50% loan prepayment under the Dividend Amortization clause (ie. as we have already passed the $6m annual threshold in the Dividend Amortization clause), then for all total distributions we make up to $12.5m, half will be dividend and half loan repayment, after which point there will be no further loan repayments until maturity as the total outstanding will have then been reduced to $27m."

Page 9 of the Q1 report shows this: Interest-bearing debt $36.6m.

Then, after Q1, they paid down $3.5m, so I guess remaining debt is $33.1m - with a little interest added on each month. This explains why they talked about "all total distributions we make up to $12.5m, half will be dividend and half loan repayment" - because half of $12.5m will be enough to pay down the $33.1m loan to $27m - after which all money can go out as dividends. Presumably, cash in the bank + scrap value will pay down the $27m loan when the company dissolves, with any leftover money coming to shareholders also (I haven't calculated that bit yet - would be good if someone can help there!).

This means that, if net profit for Q2 is around $10m like it was in Q1, $5m will come to us as dividend, and $5m as loan payment. Then if Q3 is the same, just $1.5 loan payment will bring the loan down to $27m, with the remaining $8.5m coming to shareholders. Starting from Q4 and onwards, pretty much all money will be dished out as dividends.

What this tells me is that we cannot expect a huge dividend in Q2 afterall. We can forget 6 NOK, and maybe not even as much as 4.5 NOK like I originally thought. I suspect around 3 NOK or slightly less. Starting from Q3/Q4 that should increase dramatically, and it is there that we really should hope for good day rates. Good day rates in 2021 will mean a dividend bonanza!

Does this make sense, and seem accurate...? Or have I made a mistake somewhere (again)...? :-)
Redigert 09.06.2020 kl 11:25 Du må logge inn for å svare

Moonee the dividend for Q1 is USD 0.30, thus NOK 2.80 on today's rate. 11.6% if you bought the stocks at 24 (46%-ish for the year!!). In other words, NOK 2.80 for Q2 2020, same as for Q1, is indeed a very very happy dividend. NOK 4.5 or NOK 6 per stock for Q2 would likely be a world ever record dividend on today's stock price.
09.06.2020 kl 15:46 1473

Yep, I know Q1 was 0.3 USD - that cash will arrive in 7 days time on 16th June ;-)

A 46% yearly yield isn't necessarily good or bad when you consider that the company has just 2 more years left to live, and the share price will drop according to the dividend. What I am trying to do here is come up with realistic approximations of what the dividends will be for the next 9 quarters, because for this investment to end in a profit, the equation is simply:
Q1,2,3,4 2020 dividend + Q1,2,3,4 2021 dividend + Q1,2 2022 dividend + final scrap/cash payout.

If that all adds up to more than I paid per share, I make a profit. If it adds up to less, I make a loss. Hence, the dividend payments are the key here. Share price doesn't matter in the slightest (at least, if you are planning to hold for 2.5 years, of course), and a 46% yearly yield also doesn't matter, if next years yield is 20%. What we need is for all dividend payouts to be greater than the value of the price paid.

So, if 0.3 USD is paid out every quarter until the company dissolves, for 10 quarters in a row, then that is 3 USD, or 28 NOK, plus any money left over after scrap, so maybe in the low 30's. That will be a nice profit for someone paying 24 Kr. If dividends drop to 0.15 USD due to low rates, I will make a loss as will most other people.
Redigert 09.06.2020 kl 15:48 Du må logge inn for å svare

Moonee I agree with what you say. One thing that is interesting is all the talk about age. No we don't like aging and yes it is expensive to continue after 20-ish years but it is not unusual with large tankers pushing on for longer - 25/30 years; at least for well operated ships and obviously depending on the market rate. If the market is good (like in the hey days of 2006 - 2008) sellers and buyers of cargoes doesn't care of the age as long as the classification of a ship is correct. With a current good daily break even at USD 13,000-ish there is plenty of room for saving for rainy days and continue with good dividends. The current dividend rate is of astronomic proportions. A normal (don't ask what normal means) listed company perhaps pay out 3 - 7% on an annual basis. ADS, at this moment, pay out 45 - 50%. I would easily buy stocks in a company that pay out 9 - 11% per year (like OCY over the last five years). So what is the future for ADS? Die in 2 1/2 years, push on after 2022, grow with new-ish tonnage, sell it all for conversions or for scrapping, storage units. Time will tell but we all look forward to Q2 2020 with excitement.
09.06.2020 kl 19:12 1191

My gut feeling is that Q2 numbers will be similar-ish to Q1 and thus I think Q2 dividend will be around $0.25-0.3
10.06.2020 kl 10:21 943

There is currently no indication that the company will continue after 2022, and all the signals from the company are that it won't continue. Anything else, of course, will be a bonus, but I am not factoring in that into my analysis - I am expecting the company to dissolve after the ships reach their 20 year birthdays.

For that reason, I don't think it is valid to say an annual dividend of 40-50% is "good", since we have just 2 more years of dividend remaining. Two years of 50% dividend gives us just break-even. What will happen with this stock, is that the share price will reduce each time a dividend is paid out, and will stay reduced - it won't eventually "bounce back" like a regular 7-10% dividend-paying company with a long life. After 2.5 years, I expect the stock price to be roughly equal to cash + scrap value (i.e. between 3-10 Kr, not sure exactly) - it won't be up in the 20's the day before it dissolves!

Hence, the key is the dividends! The dividends must add up to more than the price I paid, for this to be a profitable investment, since there will be no share price left to speak of. In a market with prolonged good tanker rates, this looks like a good investment. If rates go down to $20k a day or less - for an extended period - it is a bad investment. So these new US sanctions, sinking oil price, and another contango, would be good for rates and therefore this stock. And we only need rates to be good in 2020 & 2021 (and half of 2022) - the long term rates don't matter to us, unlike other tanker companies :-)
10.06.2020 kl 10:31 902

Everything is possible. This is what ADSC management i answering in an e-mail dialogue:

Mail from Terje Bodin Larsen 21.05.2020

“With respect to your question, the most likely plan is that the vessels will be recycled at time of their 4th Special Survey in 2022. Generally the market is very limited for trading vessels exceeding that age ( other than for storage, which off course can be an alternative).
The plan is furthermore to distribute maximum of trading profits and recycling proceeds relating to these three vessels to shareholders. Fleet renewal or expansion, which the company is continuously evaluating and considering, will be financed independently of that.”

LINK: https://shareville.no/aksjer/ads-crude-carriers/kommentarer