International Seaways: One Of The Best-Diversified Tanker Companies; Rating Upgrade

seekingalpha04-13

INSW is a bet on the continuation of the tanker cycle's upward move. The company offers exposure to the broad tanker universe, having crude and product tankers.In 2023, INSW scored remarkable results:...

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The company offers exposure to the broad tanker universe, having crude and product tankers.In 2023, INSW scored remarkable results:...</p>\n\n<a href=\"https://seekingalpha.com/article/4683590-international-seaways-one-of-best-diversified-tanker-companies-rating-upgrade\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>International Seaways: One Of The Best-Diversified Tanker Companies; Rating Upgrade</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nInternational Seaways: One Of The Best-Diversified Tanker Companies; Rating Upgrade\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-13 17:29 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4683590-international-seaways-one-of-best-diversified-tanker-companies-rating-upgrade><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>INSW is a bet on the continuation of the tanker cycle's upward move. The company offers exposure to the broad tanker universe, having crude and product tankers.In 2023, INSW scored remarkable results:...</p>\n\n<a href=\"https://seekingalpha.com/article/4683590-international-seaways-one-of-best-diversified-tanker-companies-rating-upgrade\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"FRO","symbol_name":"FRONTLINE PLC","start_time":0,"source_url":"https://seekingalpha.com/article/4683590-international-seaways-one-of-best-diversified-tanker-companies-rating-upgrade","article_id":"2427126710","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1369885749/image_1369885749.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2427126710","pubTimestamp":1713000557,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"INSW is a bet on the continuation of the tanker cycle's upward move. The company offers exposure to the broad tanker universe, having crude and product tankers.In 2023, INSW scored remarkable results:","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"FRO":"FRONTLINE PLC","BK4588":"碎股","STNG":"Scorpio Tankers","INSW":"International Seaways Inc","BK4021":"海运","ASC":"Ardmore Shipping Corporation","HSHP":"Himalaya Shipping Ltd.","BK4144":"石油与天然气的储存和运输","TRMD":"Torm PLC","TNK":"Teekay Tankers","TNK.AU":"Think Childcare","BK4585":"ETF&股票定投概念"},"translate_title":"国际海运公司：多元化程度最高的油轮公司之一；评级升级","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ASC":1,"FRO":1,"HSHP":1,"INSW":1,"STNG":1,"TNK":1,"TNK.AU":1,"TRMD":1,"US912796CX52.BOND":0.6,"US30Y.BOND":0.6,"US912797FH58.BOND":0.6,"US912797FS14.BOND":0.6,"US912797GB79.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GW17.BOND":0.6,"US912797HE00.BOND":0.6,"US912797HG57.BOND":0.6,"US912797HH31.BOND":0.6,"US7Y.BOND":0.6,"US6M.BOND":0.6,"US5Y.BOND":0.6,"US3Y.BOND":0.6,"US2Y.BOND":0.6,"US12M.BOND":0.6,"US10Y.BOND":0.6},"content_text":"INSW is a bet on the continuation of the tanker cycle's upward move. The company offers exposure to the broad tanker universe, having crude and product tankers.In 2023, INSW scored remarkable results: a triple-digit cash flow growth and 15% FCF yield.The INSW LTM dividend yield is 12.02%. In FY23, it paid $308 million in dividends, or $6.29/share. The company keeps the payout ratio below 60%.INSW trades at 81% PNAV, owns a quality fleet and has a 21% gross LTV. I update its rating to a Strong Buy.   Antony Velikagathu Note: I previously covered International Seaways (NYSE:INSW) in January 2024. In my note on INSW, I discussed the company's diverse fleet of crude and product tankers, its superior finances, and valuations. I pointed out that the tanker (crude and product) market will remain robust due to the dislocation between crude oil supply and demand, plus tanker supply constraints. Consumption will grow East while production will grow West, resulting in higher tonne-mile demand for crude oil transportation. In conclusion, I rated INSW as a Buy. In today’s article, I reviewed the 2023 figures and update the company's valuation. Fleet review INSW is not a crude oil pure play. The company also owns a large fleet of product tankers, which represent approximately 30% of the company’s dwt. INSW owns 13 VLCC, 13 Suezmax, and 4 Aframax tankers. Its product tankers division includes 1 LR2, 11 LR1, and 35 MRs. INSW's average fleet age is ten years. Over the last 12 months, the company has made progress with upgrading its fleet and plans to expand its MR fleet. As stated in INSW's last earning transcript, in February 2024, the company agreed to purchase two 2014-built MRs and four 2015-built MRs for $232 million in total consideration. The vessels are expected to be delivered in 2Q24. In 2023, INSW sold three older MR tankers (2088 built) for roughly $39 million in net proceeds. MR segment is attractive in my opinion because of the imbalance between record low order book and aging fleet. In 2023, the average age of the MR fleet was 13.1 years, while the order book is about 8%. On the other hand, 47% of the fleet is older than 20 years, so those ships must be replaced in the coming years. INSW owns 35 MRs. For reference, the product tanker majors STNG, HAFNF, and TRMD owns 58, 52, and 59 MR tankers. Ardmore Shipping (ASC) is the only MR-focused company with 18 MR tankers (and 4 Handysize vessels). So, INSW is a factor in the product tanker segment and will benefit from the MR market dynamics. INSW is well positioned in the LR1 segment, owning 11 vessels. In the LR1 niche, the company competes with TRMD, which owns 10 LR1s, and HAFNF, which owns 31 LR1s. Similarly to MR tankers, LR1 has an aging fleet (vessels older than 15 years are 54% of the global LR1 fleet) and a single-digit order book (4% as of January 2024). INSW purchased four scrubber-fitted dual-fuel LNG LR1 vessels for a total price of $231 million. The ships are expected to be delivered between 2H25 and 1Q26, as stated in INSW 2023 annual report. The company has the option to order additional LR1s with the exact specifications and expects delivery in 3Q26 at an extra cost of $116 million. LR1 product tankers are the equivalent of Panamax crude oil tankers. As the name implies, those ships were purposefully built to transverse the Panama Canal. So, in addition to the constrained supply due to the aging fleet and low order book, LR1s will benefit from the Panama Canal drought. The water levels in Gatun Lake remain extremely low, as shown in the graph below. Xeneta?Twitter The tonne-mile demand will stay strong due to the lower transit rates via the Panama Canal. In 2023, the company took delivery of three dual-fuel VLCCs. The vessels were purchased with a sale-leaseback agreement for $288 million at a fixed rate of 4.25%. INSW employed them under long-term contracts until 2030 for TC at $31,000/day, including a profit distribution component. 2023 financials  A large part of INSW`s fleet is contracted as part of a pool by charterers who require a more extensive fleet. More than 80% of INSW revenues come from the pool agreements, while 11% are from time charters and 7% are from voyage charters. In 2023, INSW realized $905 million in pool revenue, $96 million from time charters, and $69 million from voyage charters. For reference, 2022 INSW delivered $774 million in pool revenue, $33 million in time charter revenue, and $56 million in voyage charter revenue. Despite the product tankers representing 30% of company dwt, they delivered higher revenues than crude tankers in 2023. On the other hand, INSW scored better YoY growth in crude tanker rates, $46,619/day for 2023 vs $34,724/day for 2022. The crude tanker division delivered $512 million in revenues in 2023, 59% higher than in 2022. OPEX increased from $98 million in 2022 to $115 million in 2023. INSW achieved $33,518/day TCE for its product tankers in 2023 vs $30,221/day in 2022. YoY product tanker revenues increased by $13 million, reaching $543 million in 2023. INSW achieved impressive cash flow figures in 2023. The company delivered $688 million in operating cash flow and $338 million in FCF (unlevered). In 2022, INSW realized $287 million in operating cash flow and $87.3 million in FCF (unlevered). The table below shows the FCF yield on several tanker majors. Koyfin  Scorpio Tankers (STNG) leads with an 18% FCF yield, closely followed by INSW with a 15% yield. All companies in the group have distinct fleets, so the comparison is imperfect, though it is good enough to measure INSW's performance against broad tanker stocks. Impressive cash flow growth resulted in large dividend distributions. INSW distributes regular dividends at $0.12/share plus a supplemental distribution based on the company’s adjusted net income. The company declared quarterly dividends of $1.32/share for 4Q23, representing 60% of the company’s adjusted net income. The table below from 4Q23 presentation shows INSW dividend history. INSW 4Q23 presentation In 2023, it paid $308 million in dividends, or $6.29/share. In addition to the dividends, INSW has repurchased 366,483 shares at an average price of $38.03/share, delivering a 0.77% buyback yield. The INSW LTM dividend yield is 12.02%. The graph below compares INSW with some of the best dividend picks in the crude tanker segment, Frontline (FRO), and the product tanker segment, Torm (TRMD). Koyfin  INSW strikes a perfect balance between dividend yields and dividends safety. The company keeps the payout ratio below 60%, while FRO and TRMD ratios are above 90%. As of December 31, 2024, INSW reported $191 million cash, $3.6 million long-term debt, $603 million long-term lease agreements, and $744 million total debt. In 2023, the company paid down $382 million in debt and $50 million on credit revolving facilities. INSW maintains adequate leverage, having 43.4% total debt/equity and 31.9% total liabilities/total assets. In 2023, INSW incurred $50.8 million in net interest expenses. FY23, it delivered $579 million in operating income and $688 million in operating cash flow. Valuation The table below compares crude tanker companies with INSW based on fleet (age, composition, scrubbers), valuation (price to NAV), and leverage (gross LTV). To estimate INSW fleet replacement cost, I added lines to include the company’s product tanker fleet. The remaining companies on the list do not own any product tankers in their fleets. I applied data from Fearnley's and Compass Maritime's regular reports for VLCC, Suezmax, and Aframax/LR2 values.   Author's data In January 2023, I estimated fleet replacement cost to be $3,152 million and PNAV to be 94%. Since then, the second-hand tanker market has gained strength. Based on the updated quotes, INSW’s fleet replacement cost is $3,450 million. At a $2,510 million market cap, INSW trades at 81% PNAV. Comparing INSW solely to crude tankers is not completely fair. The following table presents PNAV and gross LTV for STNG, TRMD, HAFNF, and ASC. Author;s data The company trades at a discount compared to product tanker stocks and comes with lower leverage (except ASC), given its 22% gross LTV. Let’s look at the EV multiples. Seeking Alpha INSW traded at 2.77 EV/Sales and 4.09 EV/EBITDA in January. Today, the company scored 2.86 EV/Sales and 4.51 EV/EBITDA. INSW seems reasonably priced compared to its competitors. FRO commands the highest multiples, while Teekay Tankers (TNK) is the laggard in the group. Investors Takeaway I usually prefer a focused approach, i.e., a company operating in one segment. Great examples are DHT for crude tankers with a VLCC-only fleet or Himalaya Shipping (HSHP) for bulk carriers with its Newcastlemax fleet. The concentrated approach brings more upside potential. However, the price is the higher volatility. INSW is among my favorite diversified ship owners, with its tanker fleet covering products and crude oil. The reason is its fleet quality, solid financials, and attractive dividend yield. INSW idea carries a few risks. The prime ones are the demand for crude oil and petrol products. Both are not the most likely scenarios. China and India drive the rising demand for oil and petroproducts. On the other hand, the geographical dislocation adds more distance between the supply and the consumers. Financially, the company is sound, given its capital structure and ample liquidity. Its fleet has an average age of ten years, good enough to maintain the operational risk at safe levels.  In my opinion, we are in the middle of the expansion phase of the tanker shipping cycle. INSW is an excellent way to get exposure to the broad tanker universe. The company comes at a 19% discount to its NAV, low leverage, and distributes dividends with juicy yields. I update INSW to a Strong Buy.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2427126710"}