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Euronav Beaten Down For Wise Long-Term Decisions


Euronav is a large shipping firm focused on the crude tanker shipping subsector. They have the strongest balance sheet and the largest public fleet in this segment.

Despite producing record profits and modernizing their fleet, EURN has recently been punished for taking a conservative approach to the markets.

EURN’s $0.55 semi-annual dividend (versus $0.62 last year) caused a recent two-day selloff of over 9% even as they allocated excess cash to growth opportunities trading at distressed levels.

EURN has wise management who can perform well in all markets. They produced $740M operating cash flow over the past 18 months (vs. a market cap of just $1.36B).

Management has done everything right for long-term investors, but the market punished them based on a slightly smaller y/y dividend payout. This dislocation has created an impressive value opportunity.

Note: Picture sourced from a very helpful June 2016 presentation.

Note: Picture sourced from a very helpful June 2016 presentation.

Company Overview

Euronav (NYSE:EURN) is a shipping holding company specializing in crude tanker vessels. Euronav traded on the Euronext Brussels exchange for a decade prior to going public on the NYSE in January 2015, with the goal of simplifying their capital structure and gaining access. Unfortunately, their expansion to the US markets was ill-timed as investors have been very pessimistic. As tanker spot market rates have declined from impressive FY15 and early 2016 levers, tanker asset values have also dropped, recently hitting near all-time lows (inflation adjusted). EURN is down around 40% off its NYSE open price of $14/sh.

  • EURN currently owns a direct tanker fleet of 50 vessels and also owns two FSOs operating in Qatar through a joint venture.
  • This is the world's largest publicly-traded crude tanker fleet.

EURN recently closed at $8.56 with close to 159M shares outstanding, for a total market capitalization of roughly $1.36B. Their most recently declared semi-annual dividend of $0.55 offers a current annualized yield of 12.8%.

Largest Publicly Traded Tanker Fleet: Valuation Analysis

Euronav currently boasts the world's largest publicly traded tanker fleet, with an average age of 8 years (a typical crude tanker lifespan is around twenty years, but up to 25-30 in a strong market). Other large-scale publicly traded peers include Gener8 Maritime (NYSE:GNRT), Frontline (NYSE:FRO), Tsakos Energy Navigation (NYSE:TNP), and DHT Holdings (NYSE:DHT).

  • EURN only owns three vessels older than 15 years (3x 1998-built Suezmaxes), and I expects these to be sold off within the next year or two as contracts expire.
  • Their attractive fleet profile means minimal cash will be required for fleet renewal in the near/medium future.

We use as our primary source of data for current fleet valuations in the shipping sector. Their data is remarkably reliable and is based on algorithms which track...