The launch of Taylor Maritime (LON: TMIP) in May 2021probably couldn’t have been timed any better, with the post-Covid disruption pushing freight charges and vessel values ever higher. Its shares, which were floated at one USD, are currently hovering close to $1.50 and have strengthened after the release of an encouraging second quarter update, with the NAV since IPO up about 80%.
TMIP aims to provide investors with an attractive level of regular, stable and growing income, as well as the potential for capital growth. It does this by investing in a portfolio of mainly second hand vessels built in Japan that are employed on fixed period charters.
The latest update at the end of June reveals a portfolio of 28 ships, of which 27 were Handysize with one Supramax. Over the quarter, five vessels were fixed on time charters of around 12 months and the portion of the fleet on charters of a year or more increased to 25% and has since risen to 32%.
Buoyant position
This in line with the trust’s intention to secure more earnings cover by fixing a greater portion of the fleet on longer-term charters at attractive yields through the summer and beyond. It has now covered 53% of the remaining fleet days for the financial year ending 31 March 2023 at an average net charter rate of $19,700 per day, up from an average of $18,600 at the previous quarter end.
The NAV per share at the end of June was $1.79, an increase of 2.9% over the quarter. There was strong performance from the vessel portfolio, which was up 10% on a like-for-like basis, although the gain was partly offset by the fall in the share price of listed holding Grindrod Shipping (NASDAQ: GRIN) that fell 33%.
Overall the NAV total return for the quarter was 5.7% including the ordinary dividend of 1.75 cents and the 3.22 cents special dividend. According to the broker Numis, this represents another strong quarter for the portfolio, albeit partially offset by volatility in the share price of Grindrod.
Positive outlook
They say that the fundamental investment case remains unchanged, driven by an attractive supply/demand dynamic in the Handysize market. It is also worth noting that the manager believes dry bulk should perform resiliently during a recessionary environment − relative to other sectors such as containerships − given its focus on essential goods.
Numis describe Taylor Maritime as an interesting proposition offering exposure to an asset class that is long-term in nature and well suited to the investment trust structure. The gross yields to the fund of around 26% support the positive near-term return outlook, as evidenced by the increase in the quarterly interim dividend to two cents per share, reflecting the strong cash flows from the portfolio.
Supply side constraints continue to provide support for both rates and vessel values and are expected to persist well into 2024. Based on the current price of $1.48, the shares are available at a 17% discount to the latest NAV and offer an attractive prospective yield of 5.4%, which Numis believe offers significant value.