Recent poor performance may deter conservative investors
Stock: Costamare Inc(NYSE:CMRE)
Costamare, a $660.6 million Monaco-based owner and provider of containerships for charter, recently traded 40% discount its book value at $6.18 a share (book value of $12.80 as of June).
The company also had an attractive 6.5% dividend yield with an 111% payout ratio in the recent twelve months.
In its recent six months of operations that ended in June, Costamare reported 12% (vs. 3-year average 4.16%) revenue decline to $210.5 million and 42% drop (3-year average -7.5%) in profits to $35.6 million.
In addition to the lower revenue and expenses, Costamare reported $6.4 million in losses in relation to losses in sales of vessels resulting in lower profits.
Going back to Costamare’s balance sheet, the vessel lender had $164.9 million in cash and cash equivalents and $1.05 billion in debt ($119.2 million more than a year earlier) with debt-equity ratio 0.98 times (vs. 0.78 times a year earlier). Equity also declined by $127.2 million leading to book value of $1.07 billion.
Here is Costamare’s CFO on its second-quarter performance
Mr. Gregory Zikos, Chief Financial Officer of Costamare Inc.
“During the second quarter the Company delivered solid results. We recently accepted delivery of three second hand vessels, which have been chartered for periods ranging from 5 to 7 years. During the quarter we entered into debt financing agreements for two of them and we are into discussions regarding the debt finance of the third ship. As of today all of our new building program is fully funded with remaining equity commitments amounting to only US $ 2 million, due in 2018.
On the chartering side, we have no ships laid up. We continue to charter our vessels, having chartered in total 6 ships since the last quarter.
Finally, on the dividend and the Dividend Reinvestment Plan currently in place, members of the founding family, as has been the case since the inception of the plan, have decided to reinvest in full the second quarter cash dividends.
As mentioned in the past, our goal is to strengthen the Company and enhance long term shareholder value. In that respect, we are actively looking at new transactions selectively.”
In the past three years (excluding recent first half), Costamare allocated $94 million in capital expenditures, reduced its debt by $175 million, generated $621 million in free cash flow, and provided $270 million in dividends at an average free cash flow payout ratio of 45%.
With lower business performance in the recent half, Costamare also carried a little more leveraged balance sheet. Nonetheless, the company appeared to have well-covered dividend payouts in terms of its free cash flow generation.
Analysts have an average overweight recommendation with a target price of $8 vs. $6.18 at the time of writing. Applying 30% to its book value indicated a per share figure of $8.96.
In summary, Costamare is a potential buy with $8 per share target price.
(Recent quarter press release; Seeking Alpha) Costamare Inc. is one of the world’s leading owners and providers of containerships for charter. The Company has 43 years of history in the international shipping industry and a fleet of 72 containerships, with a total capacity of approximately 473,000 TEU, including two newbuild containerships to be delivered. Eighteen of our containerships, including two newbuilds on order, have been acquired pursuant to the Framework Deed with York Capital Management by vessel-owning joint venture entities in which we hold a minority equity interest.
Disclosure: I do not have shares in any of the companies mentioned.