Product tanker company Torm (TRMD) reported their Q3 2023 results on 11/09. As I expected, Q3 2023 results were weaker than Q2 2023 (not really surprising) and not as strong as Q3 2022. I will suggest that last year was an anomaly, and this year, is still above-average (Why? In a quarter with a fair amount of refinery maintenance, 33.3% net margin across the entire fleet is quite good)
Torm provided a useful slide deck–
Last bullet on Slide 2, suggests that based on broker evaluations, Torm’s consolidated Net Asset Value (NAV) was $2512.5M per 09/30/23. With 84.4M shares outstanding, that makes NAV (per share) = $29.77.
Ah! But it isn’t so straightforward. Other events complicate that calculation.
The events are listed on Slide 2, but I will still list them here
- During Q3 2023. Torm agreed to sell two LR1 vessels, with delivery in Q4 2023. Don’t know how Torm account for that event
- Subsequent to end of Q3 2023, Torm has agreed to sell an additional LR1 vessel and 2 MR vessels.
- Also, subsequent to the close of Q3 2023, Torm has announced the acquisition of 4 MR tankers
- Torm has also announced a deal to acquire 8 LR2 vessels (1 in 2023, 7 in Q1 2024)
Each of events 3 & 4 are/are-to-be financed with a combination of cash and shares. I don’t think Torm have enough near-term cash to cover the > $300M in cash for the two transactions. That’s the likely reason the transaction stretches out to Q1 2024. In any case, a whole bunch of variables (share count, debt, vessel values, cash) move up or down some. Don’t know where NAV finally settles, but I think the Q3 number + or - 7% is my guesstimate with the data I have currently.
When I dig into the two purchase transactions, I like event 3 more than event 4. Primary reason being the 4 MR vessels are newer and Torm has more time to generate revenue/vessel with that younger set of vessels.
In late October - early November 2023, I have added to my TRMD stake. Not going to chase after TRMD at higher levels, but will consider adding if price slips under $29.50/sh. Q4 has traditionally been a stronger market for tanker sectors (crude oil, refined products and LNG), and so far, this year seems to be playing out that way.