The Razor’s Edge

Craig Stevenson, CEO of Diamond S Shipping (DSSI), and Kevin Kilcullen, CFO, joined Value Investor's Edge last Thursday, December 12th, to discuss the product tanker and Suezmax crude shipping markets ahead of pending IMO 2020 regulations. We reviewed capital allocation priorities and why they believe their stock price has been underperforming, and what they plan to do going forward. This conversation is relevant for anyone long the product tanker or the crude tanker sector, including Ardmore Shipping (ASC), DHT Holdings (DHT), Euronav (EURN), Frontline (FRO), Navios Maritime Acquisition (NNA), Nordic American Tankers (NAT), Scorpio Tankers (STNG), Teekay Tankers (TNK), Torm plc (TRMD) or Tsakos Energy Navigation (TNP).

Topics Covered

0:45 minute mark - Start of discussion- Market review: any IMO 2020 impacts

2:25 - Product rates are lagging crude, what is driving this separation? 

5:25 - Should we expect a significant spike in rates? Any disruptions yet? 

7:55 - DSSI trades at a significant discount? How to address PE overhang? 

11:20 - How is the market shaping up for product/crude versus Q3 guidance? 

16:10 - Any new charters? Looking for cover here? Current 1-2y charter rates? 

18:35 - Any desire to add additional scrubbers to the Suezmax fleet?

22:25 - What trade flows are we seeing with MGO and VLSFO? Sources? 

27:15 - What efforts can DSSI take to reach to peer valuation levels? 

29:45 - How do you view capital allocation priorities? 

32:25 - Tackling 2021 maturities yet? Timing on those? 

35:35 - How is management compensation structured? Fleet growth? 

37:35 - Is DSSI available for sale at the right price?

Greg Zikos, CFO of Costamare (CMRE) joined Value Investor's Edge to discuss the containership markets and specific company prospects and capital allocation priorities. This interview and discussion is relevant for anyone with containership investments or interests, including Capital Product Partners (CPLP), Danaos Corp (DAC), Global Ship Lease (GSL), Navios Maritime Containers (NMCI), and Seaspan Corp (SSW). 

Topics covered

1:25 minute mark - Market review: Strong rates vs. Trade War Concern

5:45 - What is your scrubber plan for IMO 2020? Approach for capital spending?

9:45 - What are the biggest risks/concerns for this market?

12:15 - How does the supply-side look? Concerned about newbuilds? 

14:15 - Have you seen any interest in LNG-fueled ship transactions?

16:10 - What is the most attractive area to invest in for containerships?

18:35 - What are your current leverage levels and long-term targets?

23:15 - What are your priorities for capital allocation? Dividends? 

26:35 - Ready to raise the dividend yet, or need more growth? 

28:55 - How are the longer-term charter markets shaping up?

Akram's Razor was a notable bear on Nvidia in 2018 before closing a short position. Recently, he switched from the sidelines to becoming an owner of shares and a bull. We discuss what changed with the company over the past year, how it's proven itself, and what may be ahead.

Topics Covered

2:00 minute mark - revisiting the short case

12:30 - NVDA's competitive position in artificial intelligence

23:00 - Expanded advantage in artificial intelligence, with the USPS deal as an example

33:00 - How Nvidia's moat plays out for new potential entrants

38:00 - The change in the valuation picture

47:00 - How crypto wreaked havoc on understanding Nvidia's gaming segment

56:00 - The structural questions in the gaming segment

1:11:00 - Mellanox and its import/fit with Nvidia

1:19:00 - Has management regained its credibility?

1:34:00 - Applying a lens to management's views

Mark Kremin, CEO, and Scott Gayton, CFO, of Teekay LNG Partners (TGP) joined Value Investor's Edge live in New York City to discuss the current LNG markets and TGP's specific prospects. We discussed their Q4 guidance, 2020 expectations, overall deleveraging goals, future growth areas, how to balance growth versus deleveraging, sanctions risks, valuation comps, and their smaller LPG assets. 

Topics Covered

:45 minute mark - Start of discussion- Overall LNG market views?

3:15 - Fixed charters and performance versus spot players?

5:50 - Remarks on Q4-19 Guidance (see slide below)?

8:00 - Timeline for the final growth (Yamal #6 & Bahrain)?

10:45 - Deleveraging target? 5.5x versus 4.5x? 

12:50 - Timing for future growth projects? 2023/2024?

14:55 - How to balance growth vs. stock repurchases?

19:35 - Is the COSCO-related risk fully resolved?

23:35 - TGP earnings multiple & comp discussion? 

26:35 - Uses of $100M Awilco proceeds? NOK Bond plans? 

32:35 - Are dividends driving your stock? When will payouts increase? 

38:25 - What sort of forward growth is prioritized? Anything industrial? 

41:05 - Final push! Confirm no growth unless the ROE is better than stock?

43:55 - LPG assets: Are these core? Multi-gas core?

Ted Young, CFO of Dorian LPG (LPG) joined us live this morning (1 November 2019) to discuss the LPG shipping markets and specific company prospects and capital allocation potentials. This interview and discussion is relevant for anyone with LPG sector investments including Avance Gas (OTCPK:AVACF), BWLPG (OTCPK:BWLLF), and Navigator Holdings (NVGS).

Topics covered

1:00 minute mark - Overall VLGC market review

4:00 - Does the arbitrage curve and forward cycle still look strong? 

7:40 - What sort of risks should investors look for?

10:40 - Leverage is away down, what are your targets now?

12:50 - Capital allocation priorities for Dorian? Enough cash reserved? 

14:40 - Priority for dividends, repurchases, financing deals

20:00 - Repurchases low thus far? Any reason for this? 

23:30 - Possibility for a buyback deal with BW Group? Any covenants? 

26:40 - Scrubber update on timing? Delay with shipyard? 

28:30 - Discussion on scrubber fuel spreads? Savings per day? 

34:00 - LPG retrofit potential? Any expenses in 2021? 

37:50 - Reviewing utilization numbers - expectations for Q4/Q1? 

39:40 - Update on the 4x charters coming off Q4-19?

On this week's The Razor's Edge, we discussed Akram's Razor's recent short case on Invitae (NVTA). If you're following the stock, you're probably aware of the two articles the author of The Razor's Edge has posted on the company. There's a lot to cover, so we broke it down in a podcast recorded on Monday, November 4th, i.e. two days before yesterday's earnings came out. It also came out before Myriad Genetics (MYGN) earnings this week. We were joined by a colleague of Akram's, James, to have a little more color on the story.

Topics Covered

2:00 minute mark - Why Invitae?

8:15 - Investment case of accumulating the world's genetic information

17:45 - Comparison to Amazon... gene testing as a product.

22:30 - Theranos's issues and the comparison to Invitae

34:00 - Could Invitae build a data business?

40:30 - The long case for Myriad

50:30 - Challenges for NVTA

58:00 - Where do we go from here? What's the measuring stick?

1:03:00 - Is there a path to profilitablity for NVTA?

1:21:30 - Disruption of the market, redirection of resources, fraud issues and "nobility".

1:34:30 - Difficulty of building a sustainable model in healthcare due to costs.

Hamish Norton, President of Star Bulk Carriers (SBLK), along with Simos Spyrou and Christos Begleris, Co-CFOs, and Constantinos Simantiras, Head of Market Research joined Value Investor's Edge Live on October 1 2019 to discuss the dry bulk shipping markets and disruptions ahead of pending IMO 2020 regulations. We reviewed their sizable scrubber program and expectations for slow steaming into 2020 along with capital allocation priorities as results turn strongly profitable. This conversation is relevant for anyone long dry bulk shipping names including Diana Shipping (DSX), Eagle Bulk (EGLE), Genco Shipping (GNK), Golden Ocean (GOGL), Navios Maritime Partners (NMM), Safe Bulkers (SB), Scorpio Bulkers (SALT), or Seanergy Maritime (SHIP). 

Topics covered:

0:30 minute mark - Start of discussion / How is the overall dry bulk market developing?

4:15 - How is IMO 2020 developing so far? Any distortions in the markets? 

5:15 - Have there been any delays to SBLK's scrubber installations?

8:20 - Where is your fleet positioned, Atlantic vs. Pacific? Rate differences?

10:20 - What is the impact of the US-China trade war? Meaningful impact?

13:45 - Are Chinese environmental initiatives impacting the markets?

16:00 - What is causing the recent Capesize rate decline?

18:20 - Can we expect dividends soon? End of year?

21:30 - Potential for more fleet acquisitions? Criteria? 

22:45 - Impact of scrubbers on future earnings potential?

26:30 - Is there any charter activity for scrubber-equipped vessels?

30:30 - Star Bulk still trades at a huge discount to NAV, any plans to fix?

33:00 - Repurchases v. Dividends Discussion.

This week’s The Razor’s Edge looks at Domino’s Pizza (DPZ). You might be aware of the company’s turnaround in the 2010s, reinvigorating their brand and delivering steady and impressive stock market returns. You might also be aware that the company has been a target of short sellers over the back half of the decade, as they scaled to high multiples and a more levered balance sheet. And, if you’re following DPZ actively, you may have seen the stock sell off after missing its Q3 earnings numbers, and then rebound after CEO Ritch Allison’s commentary around the unsustainability of 3rd party order aggregators. We discuss Domino’s rise and whether it’s now poised for a fall. The comps have slowed and the stock has followed, flat for the last 15 months or so. Does that portend a change in direction?

Topics Covered:

2:30 minute mark – What happened in the Q3 report with the miss but then positive returns?

6::30 – the food aggregators excuse?

8:30 – the simple Domino’s bull thesis

12:00 – The missed tech play for Domino’s and the changing economics around delivery

15:00 – How do the food aggregators change the game

17:30 – Domino’s temporary argument

19:00 – The fading Papa John’s tailwind

24:00 – Domino’s remedies to counter these headwinds

28:45 – The buyback problem

32:00 – Why Domino’s and not other related plays?

36:00 – The variety on the market now and the pricing tailwinds

43:00 – Gaming out the short thesis

49:00 – The short for boring shorts?

57:30 – The international angle

1:02:00 – The food aggregators aren’t going away

The third public episode of Value Investor's Edge Live is a bonus episode, following on Thursday's discussion with Euronav (EURN) CEO Hugo de Stoop. J Mintzmyer spoke a few days later with peer company International Seaways (INSW), specifically CEO Lois Zabrocky and CFO Jeffrey Pribor. The conversation touched on similar themes, including the recent disruption in Saudi Arabia's oil supply and the pending IMO 2020 regulations. Zabrocky and Pribor shared how they are thinking about capital allocation and their view on the stock's relative underperformance, compared to peers. This was recorded on the 20th of September, before the recent big move in the shares. Given recent attention on the sector and the forthright nature of the conversation, it should be an interesting listen for followers in the sector.

Topics Covered

1:10 minute mark - Start of discussion / Initial commentary on Saudi disruption

3:50 - What sort of situation could hurt rates? 

6:20 - How are US exports looking? Signs of capacity constraints?

11:30 - IMO 2020 discussion / What have you seen in the markets? Positioning?

14:40 - What's going on with product tanker markets? When will they move? 

17:25 - What are the capital allocation priorities? 

20:10 - Is fleet growth and renewal still a consideration? 

21:00 - Scrubber commitment beyond 10 vessels?

22:00 - Scrubber savings expectation in TCE? 

23:10 - What are futures showing for spreads between fuels? 

26:00 - What is INSW underperforming peers? Why should investors buy now? 

29:30 - Are you considering repurchases? Any constraints to implementation? 

30:50 - Strategic vision of refinancing? Any relevant covenants? 

32:50 - Are your joint-ventures considered 'core?' Economics & plan there? 

34:45 - What's the potential timeline for LNG JV refinancing? 

36:40 - Is the share float or liquidity a concern for repurchases? 

38:00 - How is your performance compensation related to share prices?

Hugo De Stoop, CEO of Euronav (EURN), and Brian Gallagher, Head of IR, join Value Investor's Edge Live to discuss the crude tanker shipping markets specifically following the major Saudi disruption and pending IMO 2020 regulations. We also discussed the potential for floating storage, Euronav's capital allocation priorities, the prospect of LNG dual-fuel vessels, and overall market thoughts regarding the increased focus on Atlantic-sourced cargoes. This interview and discussion is relevant for anyone with crude tanker exposure including other firms such as Diamond S (DSSI), Frontline (FRO), International Seaways (INSW), Navios Maritime Acquisition (NNA), Nordic American Tankers (NAT), Teekay Tankers (TNK), and Tsakos Energy Navigation (TNP).

Topics covered1:30 - What are the effects of the attack on the Saudi oil fields?4:30 - What's the outlook for US exports?7:30 - Scrubbers and use of compliant fuel.16:30 - What's the plan for the second ULCC and has the been movement in the sulfur spread?21:00 - Have you hedged against oil price fluctuations? How does this impact P&L?24:00 - How will the Saudi disruption affect your Suezmax fleet?26:00 - Are Suezmaxes being used for storage?29:00 - Will storage be drawn down now that there's backwardation? 30:30 - Priorities with current cash balance.36:00 - Are you adding to the fleet and will you be looking into "dual fuel" technology?41:00 - Overall take on the market: Are you more bullish or bearish with Saudi disruption?