Tufton Oceanic Assets has published results covering the 12 months ended 30 June 2023. The NAV fell to $1.365 from $1.450, negatively impacted by the fall in capital values of bulkers and of Riposte, the containership which was sold during the financial year. The operating profit was $56.3m, up from $40.3m, however. From Q4 2022, the company raised its target annual dividend from $0.080 to $0.085 per share. That all translates into a NAV return of -0.3% for the year.
The share price fell from $1.23 per share as at the close of business 30 June 2022 to $0.99 per share as at the close of business 30 June 2023. The company bought back 6.16m shares over the period at an average price of $1.13. Since 1 July 2023, the company has bought back an additional 7,386,000 shares, but in common with most other alternative asset funds, the discount remains stubbornly wide.
Dividend cover was about 1.1x and the company is foecast to have dividend cover of 1.6x through to the end of Q4 2024.
As at 30 June 2023, the average charter length was 1.3 years.
The sale of Riposte crystallised an annualised return of 12% on this asset – good, but down on the average realised IRR over the past five years of 27%.
Two fuel-efficient Medium Range product tankers, Mindful and Courteous, were bought below their depreciated replacement cost, financed primarily by a new $60m loan which is secured on Mindful, Courteous, Marvelous and Exceptional.
The board feels that the company is well-positioned to benefit from the ongoing strength in the product tanker and chemical tanker markets. The manager expects the bulker market, supported by good supply-side fundamentals, to improve with demand growth.
At the end of the financial year, the portfolio had a total negative charter value of $49.5m. This is expected to trend to zero (i.e. increase NAV) in the medium term. Ceteris paribus, the negative charter value is expected to unwind by about $24.8m over the next 12 months ending Q2 2024 through the passage of time. The manager expects further upside to NAV as the bulker market improves and values rise.
There is a continuation vote due next year, and it’s the board’s current intention to hold this vote at the AGM in October 2024. Whilst the board anticipates the continuation vote to be passed, with discount to NAV at current levels the directors are not taking anything for granted and are working with the investment manager and its advisors to consider the most appropriate strategy for the company and will update shareholders of its recommendations accordingly. [QD comment by James Carthew: My hope is that we do not see another essentially good fund falling on its sword because of a temporary disconnect between the share price and NAV. However, I would not rule out the possibility of an opportunistic bid for the company.]
SHIP : Tufton results reflect weaker ship values