Assessing the Worth of Navios Maritime’s Assets and Liabilities
We usually adjust for items such as debt on the balance sheet. Navios Maritime Partners (NMM) had a total debt of $603.3 million at the end of September 30, 2015. Navios Maritime’s debt is composed of bank loans and other credit facilities. If the debt of a company is in the form of bonds, then we can use the current value of the bonds to arrive at the market value. For loans, it’s the principal amount, so the book value represents a reasonable proxy for the market value. Therefore, we’ll assume the book value of a company’s debt to be equal to its market value.
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When vessel values fall, the LTV (loan -to-value) ratios for a company might come under pressure. Currently, NMM is in compliance of its financial covenants. However, while NMM’s peers (SEA) Diana Shipping (DSX), Navios Maritime Holdings (NM), Scorpio Bulkers (SALT), and Safe Bulkers (SB) are also in compliance with their LTV covenants, falling asset values are putting unprecedented pressure on these companies. NM forms 1.9% of SEA’s holdings. Investors interested in broad exposure to industrials can invest in the SPDR Dow Jones Industrial Average ETF (DIA).
We’ll also adjust for other items such as intangible assets. As of September 30, 2015, Navios Maritime Partners had intangible assets worth $59.5 million, related to favorable lease terms. These are excluded while considering total assets for valuation purposes as they are difficult to liquidate and are often overstated.
Net asset value
After adjusting for all the items mentioned so far in this series, we arrive at an asset value of $716 million, which includes the current value of vessels of $644 million, cash of $33 million, other current assets of $13.4 million, investments of $1.3 million, and other non-current assets of $24.2 million, excluding intangibles. The liabilities side adds up to $633.6 million, consisting of debt of $603.3 million and current liabilities of $30.3 million. This gives us an NAV (net asset value) of $82.2 million, which amounts to $1 per share. This value, however, excludes chartered contracts, which are very important in considering a company’s assets. We’ll take these into consideration in the next part of this series and see how they change the net asset value for Navios Maritime Partners.