Flat year for Tufton Oceanic – over the year ended 30 June 2020, Tufton Oceanic Assets generated an NAV return of -0.7%. Within that, the company declared dividends of 7 cents and saw its NAV fall from $1.005 to $0.931. The target for this year’s dividend remains at 7 cents (quarterly payments of 1.75 cents).
The NAV fall was largely down to reductions in ship prices following the market turmoil associated with COVID. The dividend was covered 1.4x by earnings.
Three general cargo vessels were sold in the financial year, these were the first sales made by the company since launch, and five vessels were bought for US$77.2m, bringing the total number of vessels to 16 (three handysize bulkers, seven containerships and six tankers). The company had investible cash of $19m at the year end.
All 16 vessels are employed on fixed rate charters. Vessels coming off charter in the second half of 2020 represent about 17% of NAV, so the portfolio remains largely insulated from geopolitical and macroeconomic shocks. EBITDA-weighted average length of charter is about 2.5 years based on expected charter duration. The fleet had only about 0.5% (26 ship-days) of commercial idle time over the financial year and had no commercial idle time between 1 July and 22 September 2020. This is pretty good going given the disruption associated with COVID-19.
Extract from the manager’s report
Containerships
Despite the disruptions to the Containership market from Covid-19 (please see the Shipping Market discussion on page 13 for the details), the seven containerships operate on time charter contracts, under which the Company provides fully operational and insured vessels for use by the charterers.
- Swordfish is on a short-term charter to a public shipping company based in Asia after a small gap following its previous charter in May 2020.
- Kale, Patience, Riposte and Vicuna are chartered to a major investment grade container shipping group. Kale’s charter was extended in March 2020. Vicuna was acquired for US$8.75m in October 2019 and is on a 3 to 5 year charter.
- Citra is chartered to a leading private operator of containerships specialising in fresh fruit transportation.
- The total investment in Parrot, a 2006 built 8200-TEU containership, was US$28.3m. The vessel was delivered in July 2019 and is on a 5.5-year charter to a leading global container shipping group. The vessel had its planned third special survey and scrubber retrofit completed in May 2020. The SPV of Parrot drew down US$13.0m in two tranches under a non-recourse loan facility at a blended, fixed rate off 5.05%. The loan proceeds were used to fund the planned capital expenditure for Parrot and release cash back to the Company for new investments.
Bulkers
The market for bulkers weakened after a strong third quarter of 2019 and was further impacted by Covid-19. The Investment Manager has employed the Company’s bulkers on short term charters to position the vessels for a market recovery.
- Dragon and Aglow (handysize bulkers) operate under time charters to two private European operators. After the financial year, Dragon had its charter extended for several months, minimising the likelihood of idle time during the second half of 2020.
- Antler, a 2012 built handysize bulker, was acquired in March 2020 for US$7.0m. It is on a fixed rate time charter for 6 to 8 months to a major agricultural commodity trading and logistics company.
Tankers
- Four product tankers (Sierra, Octane, Pollock and Dachshund) operate under time charters to a major commodity trading and logistics company. Pollock’s charter was extended at a fixed rate (previously floating) for 3 to 4 years starting February 2020. Dachshund, a 2008 built product tanker, was acquired in February 2020 for US$13.25m and was delivered to the Company in March. It is on a fixed rate time charter for 3 to 4 years.
- Bear, a 2005 built crude oil tanker, was acquired in September 2019 for US$19.9m and operates under a 2-year time charter with a fixed floor rate and profit-sharing mechanism to a major tanker operator.
- The gas carrier Neon operates on a bareboat charter, under which the Company provides only the vessel to the charterer, who is responsible for crewing, maintaining, insuring and operating it.
SHIP : Flat year for Tufton Oceanic