Danaos Corp (NYSE:DAC)

CAPS Rating: 4 out of 5

The Company is an international owner of containerships, chartering its vessels to many of the world's liner companies.


Player Avatar mdhsp (< 20) Submitted: 3/15/2010 10:28:20 AM : Outperform Start Price: $4.10 DAC Score: -53.63

If I understand correctly, the PPS and low P/E is due to the 3.2 billion spent on new chartered ships of which $2 billion has yet to be paid for. Danaos has made the situation more difficult for investors by not being forthcoming about information on credit negotiations started in June (for the $634m additional liquidity they reported needing at the time). This would presumably get them through 2010.

The upside is the fact that these ships are chartered vessels that have long term contracts already in place; however, again, given the state of things in that area of the world it wouldn’t be surprising to see some defaults.

In years to come high interest rates and dilution will plague investors in this company as Danaos pays off this debt. The stock price has been adjusted to reflect this; however, has the market once again overreacted?

My bet is that it has and that this well-managed and highly profitable company is indeed undervalued.

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