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Outstanding track record with flawless balance sheet.
Bringing Oil to Market & People Hate it
Imperial Petroleum ($IMPP) is an international shipping transportation company specialized in the transportation of various petroleum and petrochemical products in liquefied form. They started with 4 oil tankers (oil product and crude oil tankers). However, they quickly expanded to nine. Of these, they each have one ship that is, 10, 11, 12, 14 and 16 years old and four are 15 years old. These 9 have a total capacity of 628,000 dead weight tonnage (dwt).
As of a couple of months ago, they arranged an agreement to acquire two additional vessels: the Aframax tanker Stealth Haralambos, built in 2009 and the product tanker Aquadisiac, built in 2008. The contract value for both vessels is roughly $71m and they will be delivered on a charter-free basis in January 2024. According to Imperial Petroleum, the company aims to fund the purchase price with cash on hand (see more below).
The two acquired vessels feature an aggregate capacity of approximately 163,716 dwt.
The comapny was founded in 2021.
Ratios
P/E 1.0
P/B 0.09
P/S 0.2
P/FCF 1.17
[By how their competitors are trading, it should be sitting at 18-21 USD a share]
Quick Ratio: 9.83
Current Ratio: 10.28
Book Value per share 19.62
Cash Flow per share 6.79
Market Cap 42M USD
Performance
Activity
For the six months ended 30 June 2023, Imperial Petroleum revenues increased from $16.5M to $124.5M. Net income also increased from $304K to $52.6M. Revenues reflect an increase in demand for the Company’s products and services due to favourable market conditions. Net income benefited from Interest income increase from $44K to $2.1M, Foreign exchange gain/(loss) increase from $18K to $149K (income).
The company reported $59.04 million in sales this quarter. This sales figure is a 420% increase over sales of $11.35 million in the same period last year.
In this quarter, they possessed 96.8 million dollars after they paid off ALL of their outstanding loans (45.5M).
For Q3, (October 25th, 2023)
Revenue came in at $29.4M (a decrease of $13.2 million). Lower charter rates and a sale of a ship hurt revenues.
Net income of $12.1 million was corresponding to a basic EPS of $0.56 (adjusted net income equal to a 26,500% increase YoY)
Voyage expenses and vessels’ operating expenses $12.6 million and $6.1 million, respectively. Compared to Q3 2022, there was $5.8 million decrease in voyage expenses is mainly due to the decrease of bunker cost by approximately $13,400 per day, as a result of lower oil prices. The $1.2 million increase in vessels’ operating expenses was primarily due to the increase of fleet by an average of one vessel.
Total receivables shot up to 50M for the quarter (381% increase), while total payables modestly increased to 8.9M (9% increase).
Highlights
Here are a few highlights that I wanted to draw upon from their 3rd quarter 9 months ending earnings call.
- Cash, cash equivalents & time deposits of $125.9 million as of September 30, 2023 (this is going to be tapped into for the 2 new ships however) is approximately 3 times higher than their current market capitalization. CASH is 3x their market cap… and more than their Q2 cash.
- Only 2% of their fleet activity is subject to spot prices (something that has killed $ZIM the last few months… I felt it…)
- Fleet operational utilization of 70.5% in Q3 23’ as the Company faced commercial idle days due to seasonal factors and technical off hire due to the scheduled dry-docking of three product tankers. The same time in ’22 showed a 75.4% utilization.
- The Company repurchased 2.58 million outstanding warrants for $0.6 million.
- Net income of $64.7 million in 9M 23’ up by $48.9 million or 309% compared to the net income in 9M 22’–If you just look at Basic EPS for the 9 months, it amounted to $3.59 which is more than double the current share price
- Their current fleet market value is 5X their current market cap.
The stock price from this news? Destroyed…
-0.39 (-20.31%) past month
-1.77 (-53.64%) past 6 months
-3.82 (-71.40%) past year
-33.15 (-95.59%) past 5 years (since Dec 10, 2021).
Profitability
They hold a 9,000 USD per day breakeven point on their vessels.
Retained Earnings have never been this high as in Q3, 2023 at 91.61M
Balance Sheet
Total Assets & Total Liabilities
Total Liabilities/Total Debt: 7.3%
Liabilities have come down from 84.4M in Q4 2022 to now 27.95M.
Q3, 2023 they only had 10.02M in Total Debt. Their lowest since paying it all off a quarter before. Net debt= -115.87M
Debt to Equity AND Assets ratio: 0.03
Short Term Debt (Q3, 2023) amounts to 15.75K
Ownership
Institutions
5.75% [Up 33.81%]
Strat. Entity
39.66% [Up 99.32%]
Others
54.59%
44% of the company shares are in Free Float
StockCalc Analysis has the stock undervalued by 105.5%
If we use the current price and use the various valuation methods of calculation, the stock is between 105-414% undervalued.
Common Equity: 352.8M
Common Equity/Total Assets: 92.66M
Closing
Overall the shipping/transportation sector has gotten murdered this year. It is one of the few who are pricing in the global recession while global tech and growth continues to see investment. The reality however is that shipping companies are generally strapped with cash, paying dividends and primed to benefit from another upswing in inflation (which seems inevitable in the long-term).
If we look at all tanker types, there has been an 80% increase in charter time & rates compared to the last 10 years. Moreover, the amount of tankers is tight–the shipyards are largely occupied with LNG & container ships. One of my favourite takeaways from Imperial Petroleum’s Q2 (2023) report was this:
Another factor that should be taken into consideration is that ship-owners might be reluctant to order high – priced new builds while regulations that set GHG reduction targets are yet to be decided as well as technology for alternative fuels to be fully developed.
Why the fuck would anyone spend 1,000,000,000 dollars if you could be hit with senseless policy that renders your investment worthless? Investors are not fully gauging the destruction of this green new scam on the global economy and the bottlenecks that are forming, everywhere. The end result is less competition for companies like this and higher probability of tanker optimization rates.
Likewise, oil demand is doing anything but going away–despite what the eco-communists are sobbing about. The fact of the matter is investment in natural resources has been lacking for 50 years and the world is feeling the brunt of it. The larger trend is the de-globalization of the world economy which in some sense means that countries or regions will seek to secure their own security and energy is the method by doing this.
Imperial Petroleum ($IMPP) remains very undervalued with a great set of returns, healthy margins, low operating expenses and consequently, positive net income. Additionally, their rapid addition of new tankers may have gone unnoticed by many and they still remain very solvent. Outside of favourable macroeconomics, the most staggering aspect I believe is the amount of cash they have while having little liability and no net debt.
I believe this is an exciting opportunity!
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