stocki711 (98.73)

NM - The most April like buy since April

October 15, 2009 – Comments (2) | RELATED TICKERS: NM , GS , GE

Navios Maritime is a fantastic small cap company from Greece. I have a hard time writing about NM because they are so good that you can start anywhere. I think most people ignore NM because they do not have access to the SEC filings on yahoo!. But their website is constantly updated with investor information and they have easy to read 10-k's and annual reports. I really like management for their ease of access to information. It's going to be released so why not help us find it.

I believe NM has aquired 9 more ships in the past 12 months. They pay for these ships with a mix of cash on hand and and perferred shares paying 6% interest and exchangable at $10 or $14 a share. During a credit crisis where GS and GE paid 10% on thier loans, NM found lenders at 6%. "They have charter out rates as follows: 99.0% for 2009, 81.4% for 2010, 63.2% for 2011 and 57.7% for 2012 of its available days on a charter-out basis for 2009, 2010, 2011 and 2012, respectively, equivalent to $251.6 million, $307.1 million, $317.4 million and $305.7 million in revenue, respectively." As taken from their recent report. That results in projected revenues for 2009-2012 respectively at: $254.1M, $377.3M, $502.2M, $529.8M. Which is definitely very respectable revenue growth. They already have $290M in revenue in the first 6 months with .34 eps. They currently have a shareholder equity of $988M+ as compared to a current market cap of $512M. They have $211M in cash on hand and $235M in current liabilities which is manageable. Their operating cash generated actually increased by 80% due to write-ups that matched last years write-downs. So for the year they are approximately flat which is impressive because last year's earnings were actually $0.75 eps a quarter so a full year earnings potential of $3 is possible.

They currently yield 4.5% which is more than a 30-year treasury bond. Not bad considering this company has run to appreciate in value while also receiving a dividend that seems safe on paper. They also own a large stake in NMM that provided 30-40% of net income generally. NM really has room to run, they have new ships purchased at incredibly low prices with loans of 6%-7% on their long term debt. If inflation hits due to a falling dollar then this company gains by paying back loans at lower interest rates while also gaining on the currency exchange benefit from their money against the dollar. From my value formula as described in fool.com, I have a target price for NM set at $13.73-$17.40 with the likely fair value at approximately $16. This leaves an absolutely April like, 220% to run and at $16 I would still see the company as fairly valued with room to grow. Navios Maritime is truly the most undervalued company.

my value formula