Must-know overview: Investing in Navios Maritime Acquisition Corp.

Part 4
Must-know overview: Investing in Navios Maritime Acquisition Corp. (Part 4 of 6)

Low vessel operating expenses benefit Navios Acquisition’s profits

Operating expenses

Navios Maritime Acquisition Corp. (NNA) enjoys vessel operating expenses significantly below the industry average and its peers’, mainly due to the operational savings achieved through a manageable agreement with its parent company, Navios Holdings. Currently, NNA’s daily OpEx is about 17% below the industry average.

Not only in the short term but also in the long run, lower vessel operating expenses are benefitting NNA and its bottom line. Also, they provides the company more room for growth and expansion opportunities.

Fully loaded costEnlarge Graph

For 2014 and 2015, with fixed contracted revenue forecasts, NNA also estimates its fully loaded cost, which includes operating expenses as per management agreement inclusive of dry docking, general and administrative expenses, interest expenses, and capital repayment.

Enjoying economies of scale due to the Navios group fleet, fixed operating expenses through mid-2016 are significantly below the industry average. With the historical trend of steady rates from 2010 until 2016 and the trend extending further into the upcoming years, NNA is well positioned to maintain its high cash flow, stable expenditure, and positive revenue structure.

A management fee is also a part of vessel operating expenses. NNA has extended its management and administrative services agreement to 2020 and also fixed its management fees for two years. By doing so, NNA has added more visibility in its operating cost and in a widely rising cost market, it has been able to reduce its VLCC operating cost by 5%. However, it has kept the rate for products and chemical tankers constant.

Average daily operating costs per vessel (including dry docking cost according to vessel type)

For all its vessel types, ranging from VLCC to LR1/MR2 product tankers to IMO II chemical tankers, NNA’s recorded average costs per vessel are much lower compared to the industry’s average costs.

Daily operating costEnlarge Graph

NNA and its peers, like Tsakos Energy Navigation Ltd. (TNP), Danaos (DAC), and Frontline Ltd. (FRO), are part of the Guggenheim Shipping ETF (SEA), their broad index.

Let’s analyze the company’s valuations attracting investor interest in the next part of this series.

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