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    Monday, January 26, 2009


    Barron's Roundtable on Stealth Gas (GASS)

    The quote below is from the Barron's 2009 Roundtable. Scott Black from Delphi talks about StealthGas (GASS). I have marked the offending portion in bold. He claims that their ships are worth $335M net of debt.

    Aggresively they may be worth $30M as scrap and that's NOT net of debt. They have about 80k light displacement tons and each ton sells for between $205-$250USD in the scrap market.

    This may or may not be a good buy but it's not "an asset play"!


    Barron's 2009 Roundtable:

    "Black: My last pick is an asset play, atypical for Delphi. ROE is only 10%, but the stock, StealthGas, is cheap. The company owns tankers that transport liquefied petroleum gas, or LPG. It's based in Athens. The stock is 4.73, there are 22.3 million fully diluted shares, and a market cap of $105 million. It pays a 75-cent dividend, for a 15.8% yield, but they may not continue to pay it. Some shareholders think they should buy back shares or knock down debt instead

    Schafer: What's the book value?

    Black: Book is $14.23 a share and there is no goodwill, so price-to-book is 0.33. For 2008 I figure they earned $1.35 to $1.40 a share on revenue of $112 million. The company already has contracted for 67% of its voyage days for 2009 and 34% for 2010.

    Schafer: How much stock does management own?

    Black: About 6.5 million shares out of 22 million. The company has 39 boats. Day rates should come down a bit, to $7,000 from about $7,600. They get $21,000-$22,000 a day on three of their product carriers, so total 2009 revenue could be $124 million. Operating expenses will go up. We assume a 5% increase, to $5,760. They have $241 million of debt. Subtract about $94 million in expenses from $124 million in revenue, and you get estimated earnings of $30 million, or $1.35 a share. Street estimates are $1.42 to $1.45. Analysts have a higher revenue estimate. The stock sells for 3.5 times my earnings.

    StealthGas specializes in short-haul, or feeder, boats. They come into a harbor in, say, Singapore or Thailand or the North Sea and offload their cargo. Four customers account for 60% of revenue: Shell, Statoil, Petredec and Vitol. Many contracts are for three or four years. The company's net debt-to-equity ratio is 0.71 to 1. Management says it has access to credit. Borrowing is done ship by ship.

    Gabelli: What does a new ship cost?

    Black: A new LPG tanker is about $18 million, and a product carrier is about $57 million. The fleet is only 10.8 years old. On a scrap-value basis the LPGs are worth about $500 million and the product tankers, $60 million. That's $560 million, less net debt of $225 million, for a total of $335 million or $15.09 a share, conservatively. After this year StealthGas will be cash-flow positive because it has finished building its fleet. That's it for me."
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