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THREAD $STNG
Scorpio Tankers looks to turn around year-long shares slide.
Scorpio Tankers president Robert Bugbee promises an active week of investor updates as the long Labor Day weekend ends in the US.
Scorpio Tankers looks to turn around year-long shares slide.
Scorpio Tankers president Robert Bugbee promises an active week of investor updates as the long Labor Day weekend ends in the US.
Shipping stocks have been a tough sell to investors in a Covid-19 ravaged market, even for tanker owners who reported record H1 profits. While $STNG is not alone in its woes, it has seen its stock deflate more than most, falling 71% from its $39.69 on 2 Jan to $11.60 last week.
The world's largest product-tanker owner was among the bottom five performers among 30 US-listed shipping stocks in year-to-date rankings supplied recently by investment bank Jefferies.
To add insult, investors expect it to get worse, holding more than 13% of Scorpio shares in short positions – one of the highest ratios in the market. But in the seasonally weakest quarter for product-tanker rates, Scorpio is ready to come out swinging with an effort to convince
...investors the stock is undervalued as a market inflection point nears. "We shall be providing various initiative and updates prior to the opening of trading Tuesday, which will be followed by an update of third-quarter bookings and website slides later in the week," (Bugbee)
...Scorpio president Robert Bugbee told TradeWinds on Monday, with markets closed for Labor Day in the US. "We are greatly encouraged by three facts. First, marine clean-product inventory destocking has almost finished.
[Bugbee, cont] "Bookings for the seasonally weak third-quarter are – considering destocking – very encouraging. And third, new deliveries for the rest of the year are minimal." Bugbee declined to get into details of what will be unveiled Tuesday and later in the week.
But it seems unlikely the Emanuele Lauro-led owner will lean solely on its positive market spin to persuade the sceptics. The company used record earnings in the year's first half to reduce its substantial debt load by nearly $200m, and there could be further updates in this area
Jefferies analyst Randy Giveans noted that Scorpio repurchased $13.8m aggregate principal of the $203m in convertible notes due in May 2022 at 88.2% of par value, and "are likely to continue to make similar prepayments going forward."
Scorpio traditionally has been aggressive in buying back its own shares, which have been trading at nearly a 50% discount to net asset value by estimate of Evercore ISI analyst Jonathan Chappell. Given the steep discount, buybacks are another logical use of capital.
Bugbee would only speak generally about the owner's finances. "We expect to continue to be able to take advantage of our improving balance sheet, young fleet and low interest rates to improve our financing. Our [capital expenditure] is falling fast..."
"...allowing us to move from defence to offense and enhance returns to shareholders," [Bugbee] said. Giveans has projected that barring vessel acquisitions, Scorpio could reduce leverage from 54% currently to 43% by the close of 2022.
Scorpio's fleet consists of 134 tankers either owned, finance-leased or bareboat chartered, with an average age of 4.8 years.
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PS Many have asked me what I make of all this, in DM's. I continue to believe $STNG sentiment is weak because the price has been hammered, not the other way around. When $STNG released Q2 & Q3 guidance early, it didn't help the stock price, so I wonder what the rationale is here.
Clearly their corporate culture is more bombastic than that of, say, $EURN or even $DHT. This has served them poorly this year. But this cuts both ways: when things are bad, they will be worse for $STNG. Hypothesis: when things are good, $STNG will outperform the others.
For better or worse, they are the 2nd most talked-about name in the space besides the much-derided $NAT. When it's time for the stocks to "pop", that will matter. But it also means the stock is v manipulated by day-traders, which is terrible. Buybacks would help investor morale.
