Marketplace Roundtable
Marketplace Roundtable

Episode · 4 months ago

Value Investor's Edge Live #51: Danaos - Massive Undervaluation And Strong Returns Ahead

ABOUT THIS EPISODE

Danaos Corp. (NYSE:DAC) CFO, Evangelos Chatzis, joined Value Investor's Edge Live on 16 June 2022 to discuss the current containership leasing markets and capital allocation priorities going forward. DAC has been a massive winner from the ongoing supply chain crisis, but they have taken the long-term view with very responsible moves including comprehensive refinancing, massive deleveraging, and fixing their fleet onto medium- and long-term contracts to lock in sky-high rates. DAC has benefitted from a significant investment in Zim Integrated Shipping (ZIM), which they have partially monetized over the past six months. Despite executing in near-perfect form, DAC stock has been stagnant the past few months and has now fallen back to negative territory y/y. This position is one of our top ideas at Value Investor's Edge, and we were very encouraged by the recent authorization of a $100M share repurchase program. DAC short interest has increased this summer and now looks to be a coiled spring ahead of what is expected to be multiple years of consecutive earnings blowouts amidst surging free cash flows. Our current fair value estimate is $125/sh, which implies around 80% upside to recent trading ranges.  This interview and discussion of the underlying containership markets is relevant for anyone with container shipping interests or investments, including firms such as Atlas Corp. (ATCO), Costamare (CMRE), Euroseas (ESEA), Global Ship Lease (GSL), Matson (MATX), Navios Partners (NMM), Textainer Group (TGH), Triton Intl (TRTN), and Zim Integrated Shipping (ZIM). Topics Covered (0:00) Intro/Disclosures (1:45) Update on overall containership leasing markets. (6:00) What is the market missing when selling off all these stocks? (8:15) Any restrictions with the share repurchase program? Available now? (10:15) Why $100M for the repurchase program (vs. more or less)? (11:30) Why not just take the company private? (14:15) Review of stock price vs. enterprise valuation. (17:45) Newbuild strategy and overall approach? (21:45) Target charter durations? (24:15) Planned leverage for newbuild assets? (27:30) When might more newbuilds be added? (33:30) Likely economic return from newbuild transactions (ROE, etc)? (36:15) Any potential for secondhand vessel purchases? (37:30) Potential for more vessel sales? Forward sales? (42:30) Dividend policy: potential for a special div or near-term raise? (44:45) Any changes to ZIM divestment policy? (46:00) Charter nuances with HMM extensions, CMA CGM options, etc. (49:00) Repurchase lock-up? Q2 reporting timeline?

Welcome to a special edition of the Marketplace Roundtable podcast featuring J mincemeyer of value investor's edge. J first began contributing to seeking Alpha in two thousand and eleven, building up a large following through his work covering shipping stocks, probably about as comprehensively as they're covered anywhere online or in print. Since two thousand and fifteen, J has run the value investor's edge marketplace service here at seeking Alpha. The service offers intensive coverage of deep value opportunities in the shipping, energy, MLP and industrial sectors. You can subscribe to value investors edge by going to seeking Alpha Dot com and typing j mince Meyer, that's M I N T Z M Y E R or value investors edge, into the search board at the top of the site. Before we began, a brief disclaim. Seeking Alpha is a website where authors from around the world share their ideas and analysis on the soccer board. The marketplaces our platform for authors to run investing analysis and idea services so that readers contain their investing to the next level. Nothing on this podcast should be taken as investment advice. And now your host, G Minsmeyer. Good morning everyone, welcome to value investor's edge live recording on the morning of June six two thousand twenty two. At about eight am eastern time today, we're hosting evangelist chassis's the CFO of the Nouns Corp. Reminded before we begin our discussion today, nothing on the call constitute's official company guidance or investment recommendations of any form. I currently have a long position in nounced corps stocks and Bolt D A C good morning, a Bandlos, thanks for joining us today. Good Morning Jane. Thank you for hosting us. Yes, absolutely, we've we've had a busy week here. We've done a lot of interviews across the sector and what a volatile time for all stocks and especially for the containership one. So we're happy to have you on the line and hopefully talk a little bit more about the business and some of the recent developments by your beans. Yes, absolutely. So we'll start out broadly and then, of course we'll get to think with a lot of folks who want to talk about which is, of course, capital allocation and the recent sherry purchase. But let's start off big picture first and work our way there. So broadly, starting out, can you talk a little bit about the container ship leasing market. I know the freight rate market. We've seen, you know, a lot of seasonalities, some of the rates are coming off a little bit, but what about on the leasing side of the business that you're dealing with? What have you seen the last few months? Yes, I mean containership charter eights haven't been affected to date. Of course, you have to Ben in mind that there aren't that many ships available to be charted the prompt so the few ships that open up maybe three, four or six months down the road. There you can charter them pretty quickly at equivalent rates to what was attainable in one, let's say. What we have seen, however, is Um liner companies, post the Water Ukraine, uh and all the uncertainty that ensued with the energy crisis and inflation and all these other things that the markets are responding already to. All these things, charters are not as keen as they were to fix forward twelve to eighteen months, which was the case previously. So there has been a lot of chartering activity over the past let's say three or four months um but whatever is prompt, it's fixed at for good periods and at good rates, and that's where we are today. Yeah, certainly, I mean we we've seen that. You put out a press release earlier this year and forward fixed around a dozen vessels and some of those didn't even open, I think, until three or even into a little bit of twenty four. As a post that was extended all the way out to correct pretty significant. Yeah, this is not happening now, but we had a ship that was on a six month market rate status, which is expiring in October, AH, which has already been extended for three years at a very good rate, equivalent to what was so uh, you know, charter vessels that opened up in the near term. You will always fix them because liners need them. I don't think people at this point are willing to sort of book forward as much as they used to before, and I think once the situation with the war and the inflation in the effects of all that on demand clears up, I think activity will resume. Also, China was closed for a prolonged period Um and that that also doesn't help. So we...

...need to get back to some sort of normality and probably then we're going to see a spike because all of the activity that you know will be deferred to that point. Yeah, it definitely makes sense. It seems like there's a lot of kind of waiting and seeing on from both sides, right, that the liners are regisent to to sign a very long term extension at this point and there's not really any ships available anyways, right. So it's not really even a pressing matter until what next spring, next summer for most of these ships, not this product. I mean we have now ships opening up two, three, Q four next year. So, as you said, it's not a pressing matter and it's it's not a concern at this point. No, I mean one of the interesting things that that we've seen in the stock market is, of course everything is falling right, but we haven't seen a lot of discretion in the market between, you know, the stocks with immediate spot exposure, whether that's a liner company, right, or whether that's even a different industry like dry book right, it versus a company like yours, which is contracted out this year, very high percentage, contracted that next year you have charters that run all the way to Um what do you think about that? Is that? Does that surprise you at all? What do you think in the market's really missing here? Unfortunately, it does not surprise me because I guess this is sort of heart mentality in the good sense of the term. Right. So, Um, people, when it comes to shipping, we've seen that many times before, tend to move in one direction without giving merit to uh, to particular companies, uh, and so on and so forth. So if it sell, it sell across the board. And actually, uh, you know, and we've always been saying that Sherry purchase program is always a Portunistic by nature, of course, and we we were not quite a bit. If that's that I term, to put together a surly purchase program and obviously, when your surprise is cheap, Um, you know, it's it's in relative terms. When, if you think that such word mentality is going to push your surprise lower for reasons that I don't understand, because you know, we're the same company we were three months ago, even stronger now, I'd say, Um, you know, then it's the right time to initiate such a program. So, yes, the market is very volatile. Unfortunately, people don't always distinguish good apples from up from bad apples, but this also presents opportunities. Yeah, certainly, I think anyone who you know owns the stock. Of course it depends emotionally, psychologically, it depends what you're you know when you bought it, when your cost basis was. But you know, if it stocks going lower in the business, value in the business setup has not changed, then obviously that creates more opportunity, as you mentioned. Since you mentioned the share repurchase, I guess will segue kind of right into that then. And so you announced it early Tuesday morning. Um. Are there any sort of restrictions with that? When? When can you start to use it? If you wanted to? We can start using it immediately, Um, and we will use it, uh, when we when we considered that it appropriate. We will monitor the share price and we relaxed accordingly. There's no there are no restrictions or other belisent whistles attached with it. It's after the discussion of the management to execute it on it. What it's is, uh, when it considers it appropriate. One of the one of the concerns, or something that you know, I've heard and we've kind of discussed a little bit, is there's these periods they calling blackout periods between like maybe when the quarters over and before the results are reported. Things like that one of the concerns is that in such a volatile market like this, there might be a case where, you know, there's a blackout period or such a month or more, and that's when the stock, you know, is extremely volatile. Is there? Does that apply to this, or is there any sort of program that can help mitigate that? Uh? Well, we could do Um, uh at ten five B one, I think. If, unless I'm mixing up the terminology here, where you you do? Uh, you have a specific program on the base of which you can trade regardless of the window. We haven't activated yet. I think for the time being will keep it simply and we've seen the process, how we deal with it. Uh, it's you know, this is obviously not gonna done overnight. We have the authorization in place and I don't believe that...

...the tailing windows, they're not that big anyway. Blackout Windows will will will affect our ability to execute on the program efficiently. So when we when we think about the hundred million sizing, Um what, what brought you to that decision? Why one hundred million and not fifty or two D or? was there a specific I mean it's a nice round number. was there needs other thoughts behind that so that there was discussion Um within the board as to what the appropriate quantum is. UH, fifty was two little. I had it in. Fifty was, you know, sounded as a bit too aggressive. We don't want to hurt the float, as we've said time and again before, we want to maintain the good liquidity trading characteristics that the stock has. So I think a hundred million was the consensus that it was a street sport. It's a decent number and at the same time it doesn't really Um. We don't believe it's going to hurt the free float in the trading of the store, you know, as the insider's interest right now, you know, I believe it's around Um. And when a repurchase goes forward, if it does, we hope, we hope it does it. It would be extremely a creative to everybody to repurchase at these prices. Um, as that goes forward, the insider interest goes higher. Um. Yes, you know what's the I guess, I mean, I don't know. I put myself, Um, in John's shoes a little bit and I just wonder at these insane prices. You know what's what's stopping a take under or take over as or a take under what someone else might I call it? You know, Um. I mean obviously there's alignment of interests. We've said that time and again with John Having this percentage. Uh. And you know it's Um, Um, you know, uh, the right time of when to implement such programs. Uh. You know, one could always argue about it. On the other hand, you know we we want to be a public company. We care about the trading of the stock. We want access to public equity and that we've recently tapped the public that markets. Uh. And you know, we want to have a diversity of when sourcing capital in order to accommodate future needs, which at some point we'll start increasing as we continue building our order book and renewing our fleet. So Um, yeah, yeah, you hope for better values, hope for better valuations in the future. No, it makes sense. I just I look at the valuations and you know, it just depends. I mean at this point the if you look at the stock price and you compare it to you can even just compare it, and you know this better. An idea of Angelos is obviously it's a CFO, but I mean you can just look at the backlog of Eva da that you have already set and you can look at a residual demolition value of the older ships and you get to a value that's higher than your enterprise. I mean it's, it's. I know, trust me, I've done this math. I've done the math and it's it's this hardening that we're trading where we are. But you know we're, I mean the the inside. There's are long term holders and, as you said, looking at the price on a on your on your screen to a certain extented psychological. But if you believe in long value, you can you can be patient and you you are certain you're doing the right things, then uh, it's it's that much better, Um, and then hopefully investors will see through that and we'll go hand in hand. Yeah, it's it's been a it's been a very interesting market. One quick note before we move on, and I don't know if this is something that would fit nicely in wanting the future presentations are not, but one thing I've really noticed in the last few years, and I mean it's really in the stock market in general, but a lot of people in the stock market they only look at the share price right, they only look at the equity component. But when somebody buys a house, they don't say, you know, they buy a house for half a million dollars and maybe they put a hundred thousand down. They say, I'm buying a half a million dollar house. They don't say I'm buying a hundred thousand dollar house right. And you know when and when the house goes up in value from you know, five hundred, six hundred Thousan in the equity goes from one to two hundred, you...

...know, they say, Oh, my house went right, it went from five hundred six hundred. They don't say when you went from one two like it's a stupid way of looking at things. And yet with the stock, like the nous corps, you have a stock that went from ten dollars. Well, it's actually like four or five, but it went from, say, ten dollars to, you know, all the way up two hundred and seven. Now we're in the seventies, but your enterprise value hasn't even moved. I mean year over year your enterprise value is actually down. So I don't know if there's a way to, you know, illustrate that better in your presentations or whatnot, but it seems like there's a disconnect from folks who look at your stock and think it's expensive or think that it's way higher, when, in reality, does that make sense? What I'm saying of Angelos? Oh, of course it does, of course it does. It makes perfect sense. Um, and you know, we're generating a lot of cash. Uh, we are, UH considerably. We're considerably paying down debt, right, and uh, as you said, the enterprise value is not moving. So I mean, we do have in our deck, we do show enterprise value, but that's a good point. I'm gonna, you know, I'll have to think how I make the point more forcefully in future presentations. This is interesting because obviously your backlog has increased. You added some vessels last year, and vessels that they turned out very well for you, right, that the joint venture acquisition, he brought the Alpha series of vessels, the Zim shares have been very economic for you. I'm sure there's been a lot of improvements that have happened right, and so that makes if you have a needbe the contract backlog of let's say two point two, two point three billion, and on top of that you have half a billion or more than that, seven hundred million in cash and and Zim Stock, which we consider liquid instruments. Um, and your enterprise values what two point three, two point four. I think it's a pretty compelling Um, the numbers speak for themselves exactly exactly. So that's why, I guess that's why I'm really glad that you know that the board and yourself and the managements came around to a sherry purchase and I hope you use it vigorously because, I mean, this is pretty incredible. It is a pretty low risk promposition to invest in your own company, right. Um. So just you know, I hope you use it as vigorously as possible. Hopefully. I know you said a hundred and fifty. Maybe he was a little high at this moment, but if the stock price stays at these levels, um, that's a massive value of creation to every metric possible. Yes, I agreed. So we'll move on a little bit because I do want there's a lot of other capital location to talk about. Um. You talked about the fleet renewal and eventually adding ships and that sort of thing. Um. You and I talked a couple of weeks ago about some of the economics of the new builds. But I want to get that on for for more folks here. I think there was a few misconceptions from your quarterly conference call. There was at one point a note by John, but I think he was you know, I think it was just a misunderstanding, but he said something about like having no leverage on the new builds and I just wanted to kind of flesh that out a little bit. What's what's sort of the strategy with the financing and chartering of these new builds? Of course, the new build will be financed actually in terms of Um, uh, you know, getting the best possible financing terms. If anything, is the new buildings that are that are going to get them right and we're very conscious about securing competitive financing arrangements. Uh and Um. So the new builds will be financed. Um. Actually we are sort of deleveraging at this point, using all the cash that's coming in in order to deliver much of the older fleet. Uh, and this is work in progress. We're mindful of overall overall leverage which at this point next that we B D A, it's below below one. It's gonna be closer to not point five at by year end. Um We you know, we don't intend to remain at those levels. Obviously this is gonna go up and it will be a function of financing for the new buildings. Uh, and of course, if the market turns and the market softens and be the faults to three years time. We've said we don't want to be about three times that that we be that through the cycle. So we we are mindful of corporate leverage, Um, and you know, but definitely new buildings will be financed. What John said, just to make it clear, is that we have not yet secure charters for the six ships because it is our view that we will maximize returns if...

...we waited out a bit and we, I believe within the next month, probably within the year, we will automately fix the ships, uh, and we will get a better outcome we would get if we had fixed them concurrently with the signing of the contracts. John said that. You know, we can afford to do this because, uh, you know, we could even in a in a worst case scenario, we could fund them all by Equity Anyway. Right. So we're not going out on a limb ordering twenty ships without a charter. That uh, you know, if we cannot charter them, then they're financing would be the problem. But for these ships we can afford to be more opportunistic, and that's what was said. It was not said that we did not intend to finance new buildings. Okay, yeah, that's howful. That makes a lot more sense because obviously there's a difference in the equity requirement between you're financing and whatever it might be. So just to clarify, in the timeline there, are you saying that? I mean, obviously there's no guarantee and it depends on the market condition. What are you saying? Kind of the goal is to get those new builds fixed on charters, maybe q three or q four this year. Is that? Is that we we have already circulated the respects of the ships. There is quite a bit of interest. We're taking our time, we're not in a hurry. My expectation is, and again, as you said, there's no guarantee, my expectation is that within this year we will end up fixing them. But you know, we can afford, let's say, to be patient, uh, and again maximize the outcome. So that's what we intend to do. Okay. Well, assuming that that goes fairly well and you sign a reasonable contractum. On the duration of those contracts, do you have any idea? I mean, I know it's a window and it remains to be determined, but with these be maybe like four or five years, or maybe closer to like eight or ten years? Any thought on that? I think it's gonna be between five and ten. UH, probably towards the five more than towards the ten. That's what we're shooting for and it will of it will of course be a function off what sort of discount you need to agree to to go to go up to ten, right. So we're gonna try to find the sweet spot, but I don't think it's gonna be. Definitely not below five. But we see whether it makes sense to go longer and what's what of discount we would have to accept. Yeah, certainly it certainly makes sense. And of course, if you go with five or six, you're talking openings and of course we don't know the market's gonna be good or bad. But what we do know is those ships would be, you know, very high spec right, and opening up at a time exactly, very exactly right. That's exactly right because they're going to be at the top of the list in terms of emissions requirements and all these other things. So they will always have a very good place in the market, and this is why we're not anxious to get necessarily ten years and accept a big discount. At this point we can afford again on these ships, to be a bit more opportunistic. Certainly. So it sounds like, if everything goes well, those ships will hopefully have a charter by the end of the year that you can announce, of course, once it's completed. And then what about financing? Is that something that gets done right before delivery? No, this is gonna be a range. The first half of next year, I guess. The ships start deliving in March of four through September. So you know, it is prudent to put financing together first half of next year, I think. Um, so we have time, there's no pressure and uh, you know, that's when it's live. That's going to happen. Yeah, definitely. Yeah, and I know we're definitely talking about a speculative timetable here. I mean things can move a little bit, but what sort of what sort of leverage? I mean assuming right, lots of ducks in a row here, but assuming the charter five, seven, eight years, whatever it might be. Um, what sort of leverage is reasonable for these new builds? I mean, obviously things can change and it depends on the banking terms, but are we talking fifty, sixty or or do you think much higher than that? It could go up to sevent I mean easy, Um, and especially when you have a good charter in place, uh, you can, uh, you know, maximize leverage, although maximization of leverage is not always the sole target, right. Um, as I said before, we're mindful of the development of overall corporate leverage. We care about are credit rating. We're recently upgraded...

...by both SMP and moodies. Uh. You know, we're conscious of the credit quality that we need to have in order to have also better access to the public net markets. Uh. And actually for the specific financing of those ships, you know, we want to get the lowest possible cost right, because these are uh top technolog top technology vessels. They will have very good charters. Uh. Therefore, whether we level them at sixty five or seventy eight, the extra levelage is not going to solve any problem for us, Um. But if we can secure much better terms at sixty five, we'll go for them. So, Um, you know, it's not that. Um, you know, the soul objective is to maximize leverage. Yeah, I mean it's definitely, definitely calculus. I guess my my point of my questioning or or my point of inquiry here is, you know it, folks, look at your your recent six vessels that you've ordered and you know it's five and twenty, five thirty million right in total CAPEX, right in in a total outlay. Um, but if you apply leverage to that, even if it's a moderate, you know, seventies eight percent leverage to that with your charter, uh, we're talking like a hundred and fifty million cash outlay here. We're not talking five and thirty exactly. Exactly. Yeah, and I think a lot of people, but people won't get that. I mean they you know, like you're throwing all this money at new bills. It's like, well, it's you know, it's a hundred and fifty million, not five thirty exactly. Okay, it's clear. To get that out there clearly, because I think there's a misconception of like how much these new builds cost and what the sort of economic returns would be. Um, I don't want to. Yeah, go ahead and a bunch of well, I agree, and that my point was whether it's whether the equity would ultimately be ahead of than thirty and have than fifty to have it in seventhy doesn't make or break our uh, you know, capital and location or our balance sheet right, as long as the depth of your source is competitively priced. Certainly so one of the big narratives and one of the big pushbacks I hear and I understand it as an investor because you know, I like repurchases, I like dividends. You know that. I think it's good to see that immediate return. Um, but one of the criticisms I hear a lot is, you know, a company like the analysis is only going to invest all their money into more new builds. So, first of all, that's something you know. That's out there and it's prevalent. But I do want to expand in that a little bit, because it's obvious that you're interested. You've you've done six of them. It's obvious that you might be interested in more. So I guess first of all, Um, how do you think about more of these? Is it? Do you do you want to fix the charter first and then add more where? Or might there be several, several more added on on speculation? No, I mean we have historically built many ships, Um, and the general rule of thumb was that we built them on the back of charges. Right. So I don't really see that we're going to have an expanded new building program all on speculation. Right. So we will do a bit of mixing and matching. Um, it depends on many factors when you place the order, how the new building prices are moving, when the vessel is due to be delivered, because the further out, of course, the bigger the risks. In this instance, for the six ships, deliveries are recently soon, which is let's say four uh, where we felt pretty confident that people would would fix those ships within the year. Uh, if you're offered twenty five or twenty six slots, it starts being different. Um. And again, you know, building on speculation, a big order book. Um, you know, it's not what what we're in the business of doing. So Uh, you know you should expect more, not necessarily very soon, but you know it is on our minds. We need to renew the fleet. We need to find the right balance on capital, a location between investing in the business and rewarding shareholders. We care about long term value. Uh and Um. So you cannot put all your all of your eggs in one basket. It would be the easiest decision in the world to splash out the money to shareholders right away. It's not how we think. We've made that very clear. We're trying to be very transparent about our thoughts on capital allocation. We want to invest in in the new technology of ships...

...that are gonna be Um. You know, they will form the next generation of containerships. We will do so gradually. We're going to be very mindful of striking deals that bring us the appropriate returns. We are not going to grow for the sake of growing, if that's what people are concerned about. We care about profitability and we have demonstraated that because we've only done six new buildings right. We haven't done seventy six Um, and the reason for that is, uh, partially has to do with uncertainties on future technology around fuels and and also sticking to our return targets, because we have seen a number of new building projects offered with charters that generate low single digit equity returns on the back of leverage. We don't believe that these projects makes sense. That's why we haven't entered into any of them. Uh. So that's how we we we were going to proceed. We're paying a dividend, we've announced a shorty purchase program I think there is room um to achieve all the goals that we have, as long as we are mindful of the core principles of where we want to get to, uh, and not rush into making decisions. I think patience is a virtue. You need to you know, you need to strike when the time is right, and typically in shipping, and that's what people some you know, people sometimes forget it. In Shipping, you make money when not not when you're investing at the top of the cycle, but when the markets oftense, and that is when you want to have the balance sheet Um to be able to source a creative growth opportunities and all fit outside through times. Yeah, we've certainly seen that and we've certainly seen those those cycles and container chips and and all the other segments as well. So it sounds like a angelos. I don't want to put words in your mount, so definitely correct me if I'm misinterpreting but it sounds like you've done these six orders. You're looking for charters on the six hopefully sousing in the next quarter or two. When you get those charters or or when you think the charters are very likely, maybe you know around the same time, you may you might order a few more new builds, but the overall idea is not to create a huge new build order book, maybe a moderately sized one, and you want to keep resources in a strong balance sheet for, you know, the future when the market might get a lot weaker. Is that a fair summer? Yes, borrowing from from Jamie diamond, we want to build a fortress balance sheet. Uh, and that's what we've going the market is offering as the opportunity to do so, and that's what we want to achieve, not just because we want to have a nice ballom sheet, but exactly because we want to be able to use this ballom sheet and take maximum advantage of opportunities that will present themselves going forward. No, market, how the market moves. Yeah, I mean, I'm sure. I'm sure, John. I mean with hindsight, I'm sure, and there's nothing you can do at the time because it would be it had been a rough decade before, but I'm sure you wish that you had a strong balance sheet in two thousand eighteen and nineteen, right, you could have definitely five ships. Yeah, no, it's uh, you know, it's interesting and it's clearly a cycle. Um. Can you one last question on the new bills here, just to clear up some things and so folks can understand. Um, can you talk a little bit? I mean, I know you haven't signed the charter yet, but I know you have some rough ideas. Um. Can you talk a little bit in broad terms, kind of the economics you see here a little bit on leverage, you can give a range, but sort of the unlevered, you know, returns that you might at seeing and sort of the R we with with leverage, because I think a lot of folks, you know, look at new bills and they think, you know, these are super low returns. Maybe they plot the ones that you're a competitor. Uh, these are these are the transactions. We did not do right exactly, because there were transactions back to back, placing the order with the charter exactly, with very low returns. Look, we are targeting double digit and leverage returns. Okay, that's our target. Uh and, depending on leverage, you could get equity returns uh in the in the high teens, right. So you know, that's what we're looking for, uh, and exactly this is why we did not pursue the transactions that others did, which is very good for them. I'm not in any way trying to be critical, but it's not a good fit for us. It definitely depends on the terms of your leverage and and things like that. I'm glad you didn't pursue forty...

...new builds a leverage Um. But I you know, I'm also cognizant of my my biggest you know, pushback or concern as an investor, and it sounds like you're being balanced. The hundred million cherry purchases a step in the right direction. My concern is, you know, the returns that you can get from repurchasing your own equity. At this point, and I know we agree on this part, that the returns from repurchasing your own equity or massive right. I mean it's like literally bar buying two dollars for a dollar or or buying a dollar fifty cents. I mean, it's very cheap. So my concern is that if there's too many new builds or too much desire to, you know, fortify the balance sheet, then we'll miss out on this opportunity with the shares. And if you can balance both of them, then I don't think it's a problem, Um, but as long as one is not heavily pursued over the other, well, I believe that we have the sources to do, you know, to pursue both right. So it won't be that one will be at the definitement of the other, Um, and it's just a matter of how you micro manage it and when you do what you do right. It's a matter of timing, but the resources are there all right. So we talked about your purchases. We we talked about vessel acquisitions. Um, gonds. Is there anything in the second hand market? I mean you did a really interesting deal last fall and I think he took actually a lot of criticism for it at the time. Um, those those ships that you might last fall, and of course the economic returns are have already proven themselves. Um. Is there any interest in other second hand deals or is that ship kind of sailed? Is it too late for those? We we thought that the ship had sailed even last last autumn, as you say, right, and we got our hands on that, on that deal, which was a terrific deal. Um. So yes, we're definitely always looking out for opportunities. They would have to be younger ships, as those ships where, uh, those six vessels you are effecting to all so are top notch in terms of emissions and the environmental considerations. Um, I don't think there's that many in circulation, to be honest, at least not that many at reasonable prices. So, Um, we'RE NOT gonna pay top dollar at the top of the market, definitely to buy a second time tonnage. Um. But if opportunities present themselves, we we we have the ability to act very quickly and take advantage of them. Certainly on the other side of that token is looking at some of your really old ships, and I say really old, I mean you know they're built to do thirty or thirty five years of service, but in this market twenty years is pretty old. You sold two of them for four delivery. You have some openings coming up in twenty three. Some of those are kind of older ships. Is there any interest in doing more forward sales to kind of accelerate that renewal of the average age. Uh, you know, we're not excluding any of it. Um, as long as they're as they're, you know, as they can be chartered Um for good periods and at good rates, it's always better to keep them Um. But you know, we're not. UH, there's no sort of hard rule on how you approach these matters. Will you know we will monitor how the market moves and we will decide accordingly. Yeah, certainly interesting. I knew one last crisis and I'm just I mean, I'm basically passing along questions or or critiques I see of the Nawa's corps. One concern I've seen is that if the market softens in the twenty three or twenty four, hopefully it's more of and less of twenty three. Right, hopefully. We don't know, Um, and some of these vessels are on lucrative charters, but they're gonna come off their charter and they're gonna the older. They're gonna be twenty years old, right, and they come off the charter and the rates are so bad. Maybe it's twenty five and the rates are really bad, will you keep a ship on speculative at that point, Evangelos, that the returns don't make sense? Or would that be an obvious, you know, demolition candidate? Get rid of it and focus on the newer ships? Yeah, I mean we look, we've been through a big you know, since Oh eight financial crisis. Through Covid we we openated the company during a very bad market and during those twelve tough years we did demolish a number of ships, uh when, uh, it was evident that it did not make sense to maintain a twenty five year old ship, pay for its night talking and upkeeping and the vessel would barely earn opics. Right. So, yes, we're not going to shy away from from scrapping tontege. Market fundamentals are...

...such that, you know, uh, lead to such a conclusion. Right. So we're not sentimentally attached to the vessels. And actually, exactly this goes also to my earlier point about reinvesting in the business and ordering new tonnage. Exactly we want to maintain the competitive edge of this company. You know we need to do we need to order modern tonnage, exactly because of the effects of a software market. Uh, maybe, so you may have to dispose some older tonnage in a in a very bad case scenario, but you will still have your new ships that will have come online by then to replenish your income. And to be honest, I don't see that we headed um off of a cliff. Uh. You know, it's a psyche. Shipping is cyclical. At some point the market will turn, but given the you know, the fundamentals, the House you at this point is that yes, the market will correct and maybe the you know, the the the the high rates that we've been able to achieve will come down a bit, but even at the corrected levels they will still be super healthy. So I don't foresee that. Of course I don't have a crystal ball, but with what we know today and unless there are other black shone events that I cannot predict, we don't see a hard landing of the market in the near future. I don't know if that helps, but that's our view. Why I admire the optimism, but it's a there's a there's definitely some stormy clouds on the macro front and we'll see how they how they transition themselves. Of course you have a layer of isolation due to the structure of your contracts Um but of course, at some point right the market strength will will matter. Hopefully, hopefully, the market doesn't turn for another year or two. Um. It's just it's hard to tell at this point. I think, from the macro side of things, I'm sure it's hard. Yeah, it's hard and yeah, we don't we kind of tell the future. Certainly so. Look, we we talked a lot about capital location. The last sort of leg of that share that I want to address is the dividend. Um, the dividend. You didn't recently started the dividend last year right after many years of being unable to pay a dividend due to obvious, you know, balance sheet reasons. Um, you started off, as as you know, decently size considering you hadn't had a dividend. But now it's a tiny, tiny percentage right off your cash flows. Very small percentage. Um. is their potential for like a near medium term dividend? Rays is there any h's just something like a special dividend? Any sort of thoughts put out of that? Well, I cannot comment on on a special dividend because this is after the discretion of the board as it is a one time item. But I can't tell you about the regular dividend that you know we have, uh, committed on on, you know, to keep on growing it, and that's when that's what we intend to do now, the pace of such growth. Again, we will see it going forward. We've recently raised a dividend by Um and, Um, you know, our goal is to have a sustainable dividend that the company is going to be able to pay going forward. Uh, and, you know, paying out a big regular dividend at this point, with all the concerns that you rightly mentioned about the coming year, UM, without supporting it with with further growth and new ships coming online and new new he'd be degenerated from new built and all these other things. Uh, you know, we don't believe it's it's necessarily prudent. So we want to have an old weather dividend and that's where this is all coming from. And yes, we want to have, you know, to continue growing it at the at the proper pace, and that's what we'll do. About the what about the remaining stake in exam and I know we've talked about this, you know, and lots of different calls. Um, he invested a lot of it over the past few quarters. Um, do you think you'RE gonna BE? I mean it's obviously noncore. I think you've been pretty clear on that. It's just something. Do you think you're probably gonna be out of them by maybe the end of this year? Is that a reasonable target, or do you think it might take longer? Any concept, our position hasn't changed. Um, it's non or and, as you said, we said we would gradually divest and...

...that's what exactly what we've been doing. Um, and you know, the numbers of Zim look great for this year, right and uh, there is a lot of uh dividends that are going to come our way, you know, come the way of all Zim shareholders. And so yes, it's gonna be again, gradual divestment. The dividends. Income is also on our minds. We want to, you know, sort of maximize, Um, AH, the position as best as we can. So I I you know, I don't want to give you a specific timeline that you're gonna hold me to, but yes, near term, whatever that means, twelve, eight twelve to eighteen months, this is gonna probably not be on our books anymore. Okay, thank you, Mars Um. Two things, and I think you and I have talked about this song, you know, in our previous comb but I just want to make sure it's out there for all investors. Um, asking a little bit of nuance. First of all, on the honey hmm vessels that come open. In my understanding is does have a three I think it's a three year extension on those. Can you talk a little bit about when that needs to be exercised? Is it? Is it all in one chunk, all three years or nothing? And then when do they need to exercise that? Yes, it's a three year extension at the current rate, which is north of sixty thousand dollars Um and uh, they you know, they need to declare it close to the firm vidiod expiry. So this is not going to be declared anytime soon. Um. Actually, you know, to three years ago, uh, no one was even looking at these extensions as candidates to be extended. But the way the market has developed, these are actually good rates for these ships, but we're not gonna know before we close, uh, to the expiety of the charter. Yeah, it makes sense. Yeah, I remember looking at those even just two years ago and thinking those rates were laughably high. There's no way, Um, and now that, if anything, they're low. So yeah, it's it's funny that I changed other new ones. is on the C M A C G M ships, and I know we talked about this a lot, but my understanding is they have a six month option on those ships, or six month mandatory period, where they have to pay whatever the broker says the rate is for six months. Right, and if you go up to twelve, right, six to twelve, but they're only six because the rate is so high. Is that right exactly? I mean we we have already, Um, AH, fixed the number of them for the six month video at market. UH, and we've been learning close to a hundred and fifty thousand dollars a day on these ships, Um, because that's where the spot rates are for such vessels today. Right. And actually on the on the latest one of them. UH, well, it is running at north of haven and fifty thou through October of this year. It has already been extended for three years at at at a pretty high rate. So, Um, that's what we expect happening on all these other ships of this series. Yeah, I know that. That's howful. That makes sense. I think the one before it was also extended. Right. I think the one before it was amazing correct for five years? Yes, correct. The one before that was excited for five years. That's proct okay. So I guess we'll see what happens on the rest of them. But it sounds like those six month charter roles are happening and they are happening at very similar rates to what we already saw. Is that fair? Yes, yes, okay. Final questions for you on on kind of a nuance here, and I you know, if you can't answer exactly that, okay, but I think people are curious. In the US there's a period of lock up where a lot of companies cannot repurchase within two weeks of the close of the quarter, which is I mean that's like today, right, two weeks at the close of the quarter, Um, and then they can't repurchase until after their report results. Um. Does that sort of like draconian lockup apply to you or is it something different, like internally that you've figured out? My understanding, Um, from the latest discussion I had with our lawyers, is that we can still execute on the repurchase. I think we go you know, we have to be a bit more mindful of you know, from June through the publishing of earnings, but even then when there's nothing material sort of happening which is non public, I think, you know, one shouldn't be in trouble h forty for Justin shared I...

...mean, we will observe whatever needs to be observed. We we all, we always do such we've handle such matters in a prim and proper fashion. But you know, we're not going to Overdo it. We're gonna do what is required, uh, and what securities law prescribes. But I don't think that there are any hard restrictions as long as, Um, you know, things have been that you know that are happening in the background have been already disclosed to the markets, which is the case at this point, and people, uh, you know, are properly informed. Yeah, that's Helplvngeli said. Just a piece of advocacy for me. Um, I hope. Obviously it depends on your nitors and how fast you can turn things around, but I would advocate that you report your your q two results as soon as possible, right, I mean if you have a choice between the end of July and the middle of our Um, let's do the end of July. Yeah, no, we always, we always try to report and we we typically do that at the end of the next month, after the quarter ends, and I think this time we're gonna be reporting learnings. If probably August first, which is a Monday. Uh, that's the most likely date, but in any event, when we have more clarity on the specific date, we will put out a release. But that's what I expect. All right, Ev Angelis, that's that's fair. Um, I would love to see July Monday too, but no, the series the better and I appreciate what you're doing. Evangelis. Thanks for joining us this morning. Thanks for taking the time to answer some of these questions. Thank you very much, Jay. Have a good one year as well. This includes our interview with the Nouns Corps CFO. EVANGELI's Chaceis recorded on the morning of June twenty two and about eight am eastern time. As a reminder, nothing on the call today constitute's official company guidants or investment recommendations of any form. I currently have a long position long exposure to announced Corps Toxobolt, D A C.

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