Quintana Maritime Limited
(Nasdaq: QMAR)
Glyfada, Greece
Website:
www.quintanamaritime.com
Quintana Maritime Limited is a Greece-based provider of dry bulk cargo marine
transportation services to the global market. With an insatiable appetite for
large bulk dry commodities such as coal, iron and grains growing from massive
emerging economies such as China and India, as well as the Middle East, Africa
and Asia, the demand for bulk water transportation is strong and expected to
continue.
While the key catalyst is the surging demand for commodities to build
infrastructure and satisfy consumer and business demand, the distances required
to transport goods to some of the farthest countries translates into higher
revenues for the dry bulk shippers. Quintana is a key player benefiting from the
global growth.
The company’s shipyards comprise of a relatively new fleet of 22 company-owned
vessels along with seven Panamax vessels that are operated under “bareboat
charters,” an arrangement in which only the vessel is rented. The total carrying
capacity of the 29 vessels is 2,644,043 deadweight tonnage (dwt). Quintana also
has plans for expansion and expects to add another eight vessels in which one
will be owned while the other seven are owned in part via joint ventures. The
carrying capacity will increase to 4,086,043 dwt subsequent to the additions.
Clients are global in nature and include trading houses, public companies,
vessel owners and operators, major producers of raw materials and governments.
About two-thirds of goods shipped around the world is done so by sea— it’s also
cheaper to transport bulk goods and often the only alternative to ground
transport. China continues to be on an extraordinary economic growth path, and
its neighbor India, with 1.13 billion people, will probably be the next big
growth region.
While the shipping industry is cyclical and driven largely by economic growth,
current estimates toward the dry bulk shipping market are bullish. The Baltic
Dry Index, a widely used measure of dry bulk shipping rates based on 40 shipping
routes, is currently trading at a record high of near 11,000, up a staggering
450% since January 2006. Rates for shipping will be higher in 2008 driven by new
iron ore production over the next 12 months, according to analyst Douglas
Mavrinac at Jefferies & Co. Investment firm Morgan Stanley is also bullish over
the upcoming two years.
Financial Results
Latest Quarter: Q2, 2007
For the second quarter of 2007, Quintana reported net revenues of $59.7 million,
up a whopping 203% from $19.7 million in the comparative quarter in 2006.
Adjusted net earnings excluding a non-cash unrealized swap gain of $11.5 million
surged 336% to $18.3 million, or $0.32 per diluted share, in the second quarter,
from $4.2 million, or $0.18 per diluted share, in the prior year. The strong
earnings gain was due to Quintana having 29 ships in service versus 10 for the
comparable quarter. Note the second quarter 2007 EPS calculation was based on
about 56.6 million outstanding shares, compared to about 24 million in the year
ago second quarter, which explains why the EPS increase was not as dramatic.
The balance sheet had cash of $41.5 million and long-term debt of $807.6 million
at the end of the second quarter. The debt level is high but not surprising,
given the high capital requirements of acquiring vessels for expansion.We are
not concerned, as Quintana has good cash flow and is profitable. The company
also recently paid down $185 million of debt with funds raised via a
sale-leaseback transaction.
Quintana increased its quarterly dividend payment in the second quarter by about
30% to $0.31 per share for a current yield of about 4.60%.
Guidance and Outlook
Quintana is estimated to continue to report strong growth over the next
year. For 2007, the consensus analyst estimate calls for Quintana to earn $1.32
per diluted share, up 80.8% year-over-year, on projected revenue growth of
122.3% to $229.7 million. Earnings in 2008 are expected to increase 72% to $2.27
per diluted share. Revenues in 2008 are projected to rise 31.5% year-over-year
to $302 million.
Concluding Remarks
The company just announced it would investigate strategic alternatives to
increase shareholder value, albeit no details were released. Possibilities
include the sale of the company, as Quintana may want to cash out at this high
point, or perhaps make a strategic acquisition to expand, but there is no
guarantee of either action.
Given the positive outlook toward the dry bulk marine transportation business
and the pivotal role Quintana is playing, we feel there is good upside for the
growth investor looking for a play on growth in the world economies.
