Knightsbridge Tankers Limited (NASDAQ:VLCCF)

Knightsbridge Tankers Ltd. VLCCF
$13.15 -0.92 (-6.52%) 5/15/2009 10:10 AM
A tanker company currently engaged in the international seaborne transportation of crude oil.
4* Caps, allstars 57/6
Morn 5* as of 5/15

Caps stats:
Mkt Cap $240.6M
Open $13.85 P/E Ratio 6.06 (old data?)
Prev. Close $14.07 Div. (Yield) 2.25 (16.00%)
Daily Range $13.15 - $13.88 Volume 66,468
52-Wk Range $10.01 - $35.00 Avg. Daily Vol. 146,000
Yield % 7.10
Annual Dividend 1.00
Payout Ratio 71.00
Financial Strength
Quick Ratio 4.70
Current Ratio 5.90
LT Debt/ Equity 0.43
Total Debt / Equity 0.47
Valuation Ratios
Price Earnings 5.00
Price/Sales 2.90
Price/Book 1.08
Price/Cash Flow 2.10
Per Share Data
Earnings 2.81
Sales 4.85
Book Value 13.05
Cash Flow 6.74
Management Effectiveness
Return on Equity 21.50
Return on Assets 14.30
Return on Investments 15.00
Profitability
Gross Margin 74.20
EBIT Margin N.A.
Profit Margin 58.00
Profitability Ratios (%) vs Industry
Gross Margin (TTM) 74.20 43.80
Gross Margin - 5 Yr Avg 76.00 45.30
EBITD Margin (TTM) 82.20 35.60
EBITD - 5 Yr Avg 83.42 0.00
Pre-Tax Margin (TTM) N.A. 10.20
Pre-Tax Margin - 5 Yr Avg 61.00 22.90
Management Effectiveness (%) vs industry
Net Profit Margin (TTM) 0.58 0.08
Net Profit Margin - 5 Yr Avg 60.20 21.40
Return on Assets (TTM) 14.30 2.80
Return on Assets - 5 Yr Avg 18.30 7.20
Return on Investment (TTM) 15.00 3.50
Return on Investment - 5 Yr Avg 19.40 8.80
Efficiency vs industry
Revenue/Employee (TTM) N.A. 514,693.00
Net Income/Employee (TTM) N.A. 44,909.00
Receivable Turnover (TTM) N.A. 10.60
Inventory Turnover (TTM) N.A. 36.30
Asset Turnover (TTM) 0.30 0.30

Morn stats as of 5/6/09
52-Week Range 10.01-35.00
P/E 2.2
P/B 1.0
P/S 2.5
Our fair value estimate is $29 per share. Because of a profit-sharing agreement on the charter contracts of two of its vessels (the Hampstead and Kensington), the company's revenue is likely to exceed a mere multiple of its daily charter rates. The two dry-bulk ships under construction are already signed to five-year charters and are simply awaiting delivery. Given the small size of the very large crude carrier fleet and growing global demand for crude oil, we forecast contract renewals at rates greater than the company is currently earning for its crude carriers. The company must earn a daily rate of greater than $19,400 per vessel in order to operate at a profit, and presently no vessel is under contract for a rate lower than $31,000 a day. With less than $9 million in debt due annually, we expect dividend payouts to continue to be robust.
CEO Bjorn Sjaastad has led the company since September 2007, coming to the firm after serving as CEO of Frontline's management subsidiary. Sjaastad had also previously served as CEO of a Norwegian chemical tanker company. Ola Lorentzon is chairman of the board and also a veteran of Frontline Management. He has been on the board of Knightsbridge since its founding in 1996 and has been chairman since 2000. CFO Inger Klemp is also CFO of Frontline Management, and the prior CFO remains a director of both Knightsbridge and the Frontline subsidiary. Because Knightsbridge is domiciled in Bermuda, shareholders are not offered the same protections available to investors in U.S.-based companies, such as disclosure of related-party transactions for review of potential conflicts of interest or the issuance of proxy statements. Given management's close connections to Frontline, we believe those interested in the company should take note of this lack of transparency.

Profile

Knightsbridge Tankers owns four double-hull VLCC (very large crude carrier) ships, each with a carrying capacity of 298,000 dead-weight tons. The company's vessels are operating on time charters set to expire between 2009 and 2012. Management of the ships, including crewing, maintenance, and repair, has been contracted out to Frontline. Knightsbridge has also agreed to purchase two new-build capesize dry-bulk ships, which are scheduled to begin operations in 2009.

Profitability

Comparable to other tanker shipping companies, Knightsbridge has been highly profitable recently, with operating margins averaging 48% during the past three years. This figure does not include a $49 million accounting gain as a result of the 2007 sale of the Chelsea.

Financial Health

Knightsbridge carries very little debt. It is financing the expansion into dry-bulk shipping with cash generated by operations and the proceeds of the sale of one of its VLCC ships. The company has also retained very little of its earnings, preferring to pay out excess cash in dividends.
Knightsbridge believes strongly in returning cash to shareholders. During the past five years, the firm has generated $313 million in free cash flow. During this same period, it has paid out $307 million in dividends.

Knightsbridge has no exposure to the single-hull segment of the tanker market. None of its ships is subject to phase out because of environmental regulations.