Quarterly NAV, Factsheet and Trading Update
27 January 2022
Taylor Maritime Investments Limited (the "Company")
Quarterly NAV Announcement, Publication of Factsheet and Post 31 December Trading Update
Unaudited NAV up c.3% since 30 September and c.48% since IPO
Interim dividend of 1.75 cents per share declared
Strong charter rates and cash yields in excess of 25%
Market expected to firm post Chinese New Year with further 2 to 3 years of strength anticipated
Taylor Maritime Investments Limited, the specialist dry bulk shipping company, today announces that as at 31 December 2021 its unaudited NAV was $1.4360 per share, an increase of c.3% since 30 September 2021 and c.48% since IPO in late May 2021.
The Company is also pleased to declare an interim dividend in respect of the quarter-ended 31 December 2021 of 1.75 cents per Ordinary Share, in line with its dividend target and policy (7% target dividend yield (on the initial issue price) paid quarterly).
The third quarterly factsheet for the Company is also now available on the Company's website, www.taylormaritimeinvestments.com .
Key Highlights (all as at 31 December 2021)
· During the quarter, the Company took delivery of 11 ships, increasing the Company's fleet to 31 delivered vessels and one undelivered vessel. Of the 32 vessels, 30 are Handysize and two are Supramax
· The fleet's average net time charter rate was approximately $19,261 per day, with an average duration of seven months and average annualized unlevered return in excess of 25%
· The Market Value of the vessel portfolio was $529m, a decrease of 1% or $7m versus the 30 September valuation. Strong operating profit of $27m resulted in an overall increase in NAV
· As part of its strategy to identify accretive growth opportunities to increase shareholder returns and recycle capital, the Company agreed to acquire 22.6% of Grindrod Shipping Holdings Ltd. (NASDAQ: GRIN, JSE: GSH "Grindrod Shipping") on 13 December 2021 for cash consideration of $77.9m. The acquisition is being funded by recycling capital from the agreed sale of two Chinese ships for $42.8m, cash on the balance sheet and short-term drawings on the RCF. The Company has also acquired 3.2% of Grindrod Shipping shares in the open market at an average price of $15.02 per share; the fair value gain on these shares was $1.7m at period end
· As planned, the Company drew down $120m from its RCF in order to complete vessel acquisitions; this is currently intended to be repaid from operating cashflow
Post-Period Trading Update (since 31 December 2021)
· The Company is expecting to complete the acquisition of its stake in Grindrod Shipping on 28 January 2022. This will bring the Company's total ownership in Grindrod Shipping to 26.6% (including recently announced Grindrod Shipping share repurchases)
· During January, six vessels have been fixed on new employment charters. One vessel is on a one-year charter and five vessels are on less than six-month charters in anticipation of stronger rates later this quarter. Including these six charters, the fleet average annualised yield is over 25%
· In January, the sale of one ship agreed for sale in connection with the Grindrod Shipping transaction was completed reducing the delivered fleet to 30 vessels (from 31 as at 31 December 2021). The second ship agreed for sale will deliver to the new owner within this quarter. The final seed asset is expected to deliver to TMI in early February
· Current average net charter rates are approximately $19,000 per day and are expected to improve after Chinese New Year, a period which typically shows seasonal softening
· Minor bulk demand growth is expected to continue to outpace fleet supply growth in 2022
· Further asset value upside is possible given inflation in newbuild prices, with secondhand ships valued below Depreciated Replacement Cost
Commenting on the trading update, Edward Buttery, Chief Executive Officer, said:
"This was a busy quarter during which we took delivery of 11 ships and made a strategic investment in Grindrod, a company whose fleet is highly complementary with our own, substantially increasing our earnings power and demonstrating our ability to recycle capital accretively for shareholders. We're optimistic about the outlook for 2022 and expect that the market will start to firm again after Chinese New Year in anticipation of two to three years of further strength."
Fleet and charter update since 31 December
The Company agreed to sell two ships in December (as announced on 13 December 2021). The first sale has already completed; the second is expected to complete within this quarter and this vessel continues to generate attractive earnings in the meantime for TMI. The final seed asset is expected to deliver to TMI in early February. After these fleet adjustments, TMI's owned fleet will be 30 ships and will be fully delivered.
Six vessels have been fixed on new charters since 31 December. The Company continues to spread contracted revenue across short, medium and long-term charters to balance revenue optimisation and earnings visibility with a current bias to the short-term given the time of year and our expectation that the market will improve from the second half of the quarter following Chinese New Year.
After updating for these six ships, the TMI fleet average net charter rate is approximately $19,000 per day. The updated average annualized unlevered gross cash yield for the fleet is in excess of 25%. The updated average remaining charter duration is seven months and this is expected to increase over the following two quarters (note that the average duration of these charters at the beginning of the contracts was 13 months). Furthermore, 17% of the fleet are on charters with an average remaining duration of 24 months.
Firm dry bulk shipping market
The Handysize orderbook continues to be at historical lows, standing at 4.6% and underpinning favourable forward supply dynamics. The orderbook has a staggered delivery over the next three years with 2.5% coming in 2022, 1.7% in 2023 and 0.5% in 2024 (Source: Clarksons). This remains the lowest compared to all larger dry bulk segments and non-dry bulk shipping segments. This is driven by sustained low new orders with newbuild price inflation due to increased commodity costs, orders in other segments and ongoing uncertainty around environmental regulations. Past 2023, effective supply may also decrease due to lower operating speeds required to meet decarbonization targets.
Minor bulk demand growth of 3.1% in 2022 is expected to outpace net fleet growth which is flat at just 0.1% (Source: Clarksons). This compounds the 2021 spread of 6.2% demand growth against 2.6% supply growth (Source: Clarksons). The Company believes the outlook for 2022 is positive despite a tailing off at the end of calendar year Q4 as spot demand reflected negative sentiment created by China construction industry's difficulties and normal seasonal weakness. Period time charter demand has been firming, suggesting customers expect upward momentum in the medium to long-term. Additional support for Handysize freight rates has continued to be provided by container cargoes being carried on dry bulk ships and from port congestion, both of which might recede in the medium-term.
Against this backdrop of solid fundamentals for the next 2-3 years, and given some cost inflation for newbuildings for delivery in 2024 as well as newbuild resale price inflation - the latter which increased from $29.5m to $31m between 30 September and 31 December 2021 (Source: Clarksons) - we consider there is further upside in secondhand asset values as 10 year-old benchmarks remain below Depreciated Replacement Cost (note: Depreciated Replacement Cost refers to the theoretical value of a second hand ship based on prevailing newbuilding price depreciated to current age). Since 31 December, Clarksons' 10 year-old benchmark for a 32k dwt Handysize vessel has increased from $17m to $17.75m.
Financing
At the end of December, the long-term debt of the Company was $3.2m associated with the acquisition of the seed fleet (this final amount of legacy debt will be repaid in January 2022). During the quarter ended 31 December 2021, the Company entered into a $40m accordion increasing its available RCF from $80m to $120m which was fully drawn at the end of the quarter. This planned expansion of the facility was used to complete the 11 vessel acquisitions closed during the quarter (seed and post-IPO acquisitions). The current intention is to repay drawn funds from future operating cashflow.
At the end of the quarter, the Company increased its available RCF from $120m to $160m. In January, the Company drew down a further $20m ahead of completion of the Grindrod Shipping acquisition. As announced on 13 December, the transaction is being internally funded from the sale of two Chinese built vessels for a combined US$42.8m of proceeds, cash on the balance sheet and with short-term drawings on the expanded RCF.
ESG
The ESG & Engagement Committee of TMI'S Board continues to oversee our ESG approach. A comprehensive report on ESG will be included in the Company's Annual Results for the period ending 31 March 2022 due to be published in July 2022.
TMI is committed to achieving a long-term target of zero carbon emissions by 2050, and to cross industry efforts to promote and achieve that target; the Company is a signatory to the Getting to Zero Coalition's 'Call to Action for Shipping Decarbonisation. The Company's investment and ESG strategy is aligned to specified UN SDGs, with our acquisitions adhering to the Company's ESG commitment and focusing on vessels of relatively energy efficient design, built in Japan. TMI has an ongoing, comprehensive programme to improve vessel energy efficiency, including retrofits at scheduled maintenance events, such as boss cap fins, pre-swirl ducts and advanced hull coatings, resulting in a lower carbon intensity per vessel. From a marine biodiversity perspective, TMI's entire fleet will be fitted with Ballast Water Management Systems by the end of 2022, except for one final vessel to be completed in 2023. TMI is completing a fleet wide rollout of data app EYESEA to map ocean plastic pollution. TMI is now a silver sponsor of the Mission to Seafarers' 'sustaining crew welfare' campaign.
Pipeline
The Company continues to evaluate selective opportunities in the geared dry bulk sector that offer attractive shareholder returns and scope for optimal recycling of capital.
LEI: 213800FELXGYTYJBBG50
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About the Company
Taylor Maritime Investments Limited is a recently established, internally managed investment company listed on the Premium Segment of the Official List and traded on the Main Market of the London Stock Exchange. The Company invests in a diversified portfolio of vessels which are primarily second-hand and which, historically, have demonstrated average yields in excess of the Company's target dividend yield of 7% p.a. (on the Initial Issue Price).
The Company's initial investments comprise Geared Ships (Handysize and Supramax types) employed utilising a variety of employment/Charter strategies.
The Company intends to pay dividends on a quarterly basis with dividends declared in January, April, July and October. The Company targets a Total NAV Return of 10 to 12% p.a. (net of expenses and fees but excluding any tax payable by Shareholders) over the medium to long-term.
The Company has the benefit of an experienced Executive Team led by Edward Buttery. The Executive Team have to date worked closely together for the Commercial Manager, Taylor Maritime. Established in 2014, Taylor Maritime is a privately owned ship-owning and management business with a seasoned team that includes the founders of dry bulk shipping company Pacific Basin Shipping (listed in Hong Kong 2343.HK) and gas shipping company BW Epic Kosan (formerly Epic Shipping) (listed in Oslo BWEK:NO). Taylor Maritime's team of experienced industry professionals are based in Hong Kong and London.
For more information, please visit www.taylormaritimeinvestments.com .
About Geared vessels
The Company specializes in the acquisition and chartering of vessels in the Handysize and Supramax bulk carrier segments of the global shipping sector. Geared vessels are characterised by their own loading equipment. The Handysize market segment is particularly attractive, given the flexibility, versatility and port accessibility of these vessels which carry necessity goods - principally food and products related to infrastructure building - ensuring broad diversification of fleet activity.
IMPORTANT NOTICE
The information in this announcement may include forward-looking statements, which are based on the current expectations and projections about future events and in certain cases can be identified by the use of terms such as "may", "will", "should", "expect", "anticipate", "project", "estimate", "intend", "continue", "target", "believe" (or the negatives thereon) or other variations thereon or comparable terminology. These forward-looking statements are subject to risks, uncertainties and assumptions about the Company, including, among other things, the development of its business, trends in its operating industry, and future capital expenditures and acquisitions. In light of these risks, uncertainties and assumptions, the events in the forward-looking statements may not occur.
References to target dividend yields and returns are targets only and not profit forecasts and there can be no assurance that these will be achieved.
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