Why NMM has multiple growth avenues and an operating surplus

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Multiple growth avenues

Navios Maritime Partners (NMM) has multiple ways to grow its fleet size and distributions unlike its other peers—DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Safe Bulkers Inc. (SB), and Navios Maritime Holdings (NM). Since its initial public offering (or IPO) in May 2007, the company grew its distribution by 26.4%. Its fleet capacity grew by over 400%. NMM’s sponsors provided support through various dropdowns.

NMM distribution

Also, the company can exercise purchase options that it had on its chartering vessels. Recently, the company has been very active in the sales and purchase market. It will continue to use this market to improve its fleet as opportunities arise.

NMM has a strong relationship with key participants. It has strong creditworthy counterparties— like Bunge, Cargill, Cosco, Exelon, HMM, Rio Tinto, and Yang Ming—in the dry bulk industry. The company’s charters have an average remaining contract duration of 3.1 years.

Operating surplus

For the third quarter ending on September 30, 2014, Navios Partners generated an operating surplus of $25 million—compared to $28.2 million for the same quarter last year.

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Operating surplus represents net income adjusted for depreciation and amortization expense, non-cash interest expense, and estimated maintenance and replacement capital expenditures. It’s a metric that’s used by certain investors to evaluate a partnerships’ ability to make quarterly cash distributions.

The Guggenheim Shipping ETF (SEA) is an industry yardstick for shipping companies.

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