Shipping Sector – Still Struggling to The Light At The End Of The Dock

Navios Maritime Acquisition Corp.

NNA : NYSE : US$3.58
HOLD 
Target: US$3.75
Energy — Maritime
SHIFTING GEARS
Investment recommendation
Initiating coverage with a HOLD rating and $3.75 price target

Investment highlights

 Strong brand and long-term relationships creates market
opportunity: As part of the Navios group of companies, management
maintains significant relationships throughout the industry,
particularly with banks, that allow it to see distressed deals earlier
than many of its competitors. Furthermore, the company has
proven access to multiple forms of capital and has demonstrated an
ability to think creatively and move quickly to seize opportunities.
 Focus on growing attractive VLCC segment: Recently, NNA has
focused its capital on growing in the VLCC segment, particularly
secondhand vessels. We believe this is an attractive strategy, as we
think that 5-10 year old secondhand VLCCs are currently one of the
most undervalued segments of the tanker market.

 Capital structure and employment strategy supports dividend: NNA
maintains a relatively long-term capital structure through a mixture
of term loans and senior notes, which, combined with high period
charter coverage, help support a healthy dividend of 5.6% per year.
Upside exposure to the market is primarily through profit sharing
arrangements. We believe this is a more conservative approach to
the segment.

Valuation
Our forward, normalized NAV (2016E) is $3.43 per share, not including $0.60 of dividends expected over that time frame. As such, we believe the stock is fairly valued at current levels and initiate coverage with a HOLD rating and $3.75 price target.
We use a 1.1 multiple to value the stock due to an above average, sustainable dividend, and relatively low cost structure

09 July 2014

Shipping Index Remains Under Pressure
Baltic Dry Index (BDI)    -18   863 
Rates

È

BCI

(Cape index)

BPI

(Panamax index)

BSI

(Supramax index)
INDEX

1648

-107

710

+6

684

-3

SPOT TC AVG (USD)

12524

-627

5677

+42

7150

-35

YESTERDAY (USD)

13151

5635

7185

YEAR AGO (USD)

13963

8139 9449

 

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