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Navios Maritime Midstream: Analyst targets, management comments

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Analyst targets

Bank of America/Merrill Lynch initiated coverage on Navios Maritime Midstream Partners LP (NAP) with a buy rating and a price target of $16.00. Analyst Shawn Collins notes that the company’s fleet has an average remaining charter duration of eight years, which compares favorably to its closest industry (SEA) peers KNOT Offshore (KNOP) and Capital Product Partners (CPLP) at five and eight years, respectively.

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Credit Suisse

Credit Suisse initiated coverage on Navios Maritime Midstream with an outperform rating and a price target of $16.00. Analyst Gregory Lewis commented that NAP, which was founded in 2014, successfully executed its initial public offering (or IPO) in November 2014. The company is structured as a master limited partnership with an initial fleet of four VLCCs (or Very Large Crude Carriers) with an average age of 8.3 years.

Sponsor Navios Maritime Acquisition (NNA), which maintains a 57.5% ownership interest in NAP, provides it with the option to acquire another seven VLCCs along with the right to acquire any crude, product, or chemical tanker from the Navios Group. The company expects these seven optional ships to drive high single-digit distribution growth over the coming three years. The company anticipates that it can gain an advantage over peers like Teekay Tankers (TNK), Frontline Ltd. (FRO), and Nordic American Tanker (NAT).

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Management view of industry

Angeliki Frangou, head of Navios Group, expects 2015 to be an uncertain period. Factors include anemic growth in Europe, deflationary fears in Japan, and China trying to move toward a consumer-related economy.

Noting the recent collapse in oil prices, Frangou commented, “In essence this can be a blessing due to the larger supply of oil. After all, lower oil is lower energy and this is related to your ability to consume more. It’s like a tax benefit to the whole economy.” Oil-consuming countries such as China, Japan, South Korea, and India all expect to be beneficiaries. Frangou further adds that this should translate in different ways to the different sectors with a lag to the economy. Shipping is transport, so if you have economic activities in this sector, they should do well.

Navios Maritime Midstream Partners is the fourth listed company of Navios Group. It gained a New York listing as a master limited partnership (or MLP) in November 2014. It oversees a fleet of four VLCCs, two of which are chartered until beginning of 2017. The remaining two are chartered until June 2025 and 2026. Frangou believes that this sector will see the most rapid effects, but it will take longer in the dry and container markets.

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