In a conference call the chief executive of Greek operator Box Ships saidthe market has bottomed out but admitted it’s hard to pin down the timing of a reboundin freight rates and asset values.
“I certainly believe that the market has bottomed out and things will begetting better, but at one point, things will be significantly better,meaningfully better than what they are now but it’s hard to tell frankly,” hesaid in response to a question from an analyst at Morgan Stanley.
Since it’s difficult to predict when a rally will materialise Bodouroglou indicatedthat Box Ships plans to “remain liquid for as long as possible” whileactively monitoring the sale-and-purchase market for “opportunities that will createvalue in the medium to long-term”.
When pressed about what the company plans to do with proceeds from a recent fundraiserin which it raked in roughly $10m the executive said no “specific decisions”have been made but hinted that a portion may be used to fund its new share buybackprogramme.
“We are monitoring all our options and we are considering what is best forthe company going forward, so no specific decisions to be reported right now,”Bodouroglou added when asked about whether Box Ships intends to expand itsfleet of nine containerships.
Finance chief Robert Perri pointed out that freight rates in its core marketare at “depressed levels” of around $6,000 to $8,000 per day and noted midsizedtonnage is still suffering from “cascading”, a reference to how larger ships aredominating key trade lanes.
“Vessels in layup continue to be as overhang on the market although thetotal number of vessels in layup declined to 3.4% of the current fleet comparedto an average of 4.5% of the total fleet earlier in 2014,” Perri continued inTuesday’s call.
“In addition, the weakness in charter market has continued to put pressure onvessel values and we expect values will remain depressed as long as charterrates remain weak and there is uncertainty around global growth.”
Box Ships made headlines yesterday when it announced plans to repurchase upto $5m worth of its own stock over the next 12 months. Today, Perri pointed outthe move is a response to its weak share price, which has fallen by more than40% since the end of the first quarter.
In a note that followed the operator’s earnings release Omar Nokta, anequity analyst at Global Hunter Securities, said its shares should find “alevel of support as management looks to buy back stock” but urged clients tostay on the sidelines for the time being.
“The shares dooffer good value, trading at such a discount to NAV (net asset), but we do notbelieve Box Ships is generating sufficient cash flow to bridge the gap,” hesaid after pointing out that the stock is trading at a 70% discount to NAV,which Nokta believes to be roughly $2.25 per share.
“Without a dividend, lower earnings potential and limited revenuevisibility, we do not expect the shares to trade in line with NAV for sometime,” the forecaster continued. “Accordingly the company should be able to buy backits shares at a relatively cheap price in the coming months.”
