Navios Maritime Partners Q2 Earnings
The Market Does Not Care, Should You?
Earnings Summary
Revenue: $327,600,000
Net Income: $69,900,000
Net Fleet Age: 10 YR
Contract Backlog: $3,100,000,000
Commentary
This was an exceptional quarter from Navios Maritime Partners. Angeliki and Co. continued to do intelligent things with their cash and fleet, positioning them well to continue to compound net assets overtime. The balance sheet continued to be robust with all non-recourse debt and a net LTV of just 35%.
What continues to puzzle us is the hatred for this management team and the discount given to this business on the back of that disdain. It seems many are skeptical of AF’s motives and do not like how she went about the consolidation of the previous five entities.
I will remind those skeptical that while AF may have taken those other businesses out at less than fair value, Joseph Steinberg and Ian Cummings did very similar things in their time at Leucadia and they were seen as shrewd allocators who, nevertheless, were sued many times due to the nature of the transactions they were doing.
As it relates to AF, we think that the fears of being bamboozled in Navios Martimes current form is low considering her sizeable equity ownership in the firm. In addition, while many will point to her private entity that benefits from new builds and contracting vessels, those earnings are peanuts compared to what she stands to earn by even doubling the current price of the stock.
Capital Allocation
From a capital allocation stand point we were happy to see 2% of the float retired YTD with 716K CUs and 1.2M or 4% over the last year. The total program has added roughly 8% to NAV from stock buybacks alone. It is our belief that AF is somewhat constrained by the liquidity of the stock and are certain she is not interested in tendering at the current time.
It seems to us that the priority today is to grow the fleet at really attractive long term contracted rates, reduce some of the older tonnage and begin the real repurchase program towards the end of 2027 when the fleet is fully in operation. We think this course of action makes most sense in terms of AF’s incentives.
AF is able to earn fees personally from doing these new builds and contracting these vessels, she is building value for Navios and increasing her value in that entity, all while positioning the fleet to be really well positioned for the next decade which seems to favor shipping heavily.
In summation, we think it goes fleet growth with contracted day rates, share repurchases when the fleet is fully active, and IDR payouts when the market rewards the business fairly for its fleets earnings power.
It would not surprise us if at the end of 2027, should the market continue to not care about valuing this business properly, that you would see a tender for a large chunk of the float to bring out the per share equity value.
Valuation to Peers
Navios Maritime Partners sits at a current price to book value of 0.43x and a price to Net Asset Value (NAV) of 0.35x ($133 is internal estimate, we think the number is more like $175 by the end of this year into early 2026).
When we dug into the industry peers to get a sense of their valuations the average of those companies was 1.06x with average through the cycle of 0.80x - 1.20x depending on the fleet quality and where we are in the cycle.
Below are rough estimates of the current Price/NAV for the following businesses across all segments of the shipping market that Navios serves. If we assign even 0.75x NAV for Navios (a discount to peers) you are talking about $100 vs $46 today and this assumes my NAV estimate is in correct by about 10%.
It is important that I note I think Navios actually deserves a premium to its peer group.
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