Okeanis Eco Tankers Stock: 19%-Yielder Reported Record 2023 Results
March 14, 2024
Why ECO Stock Is Bullish Right Now
Time charter equivalent (TCE) rates are used in the shipping industry to measure the average daily revenue performance of a vessel. It’s basically how much the shipowner gets paid on a daily basis.
Tanker TCE rates have been soaring since Iran-backed Houthi rebels started terrorizing vessels in the Red Sea. The conflict has forced shipping companies to reroute their voyages along much longer trade corridors around southern Africa via the Cape of Good Hope.
That adds a significant amount of time to commercial shipping routes. A typical voyage from the Persian Gulf to the Amsterdam-Rotterdam-Antwerp petroleum trading hub through the Suez Canal takes 19 days. If a ship is forced to take the Cape of Good Hope route instead, the voyage takes nearly 35 days.
Longer routes put upward pressure on TCE rates because of higher fuel costs and fewer available ships (the longer voyages require more ships to maintain the same delivery schedule).
That’s been a boon for marine shipping companies.
A ceasefire in Gaza could be possible in the coming weeks, but it’s not a given. And even when the conflict in Israel winds down, there’s nothing to say that Houthi rebels will stop attacking ships in the Red Sea. After all, Iran blames the instability in the Red Sea on U.S. support for Israel.
Until there’s some sort of ceasefire on all fronts, marine vessels will need to keep rerouting their travels. That should continue to help marine shipping companies like Okeanis Eco Tankers Corp (NYSE:ECO).
Greece-based Okeanis Eco Tankers is an international shipping company that operates in the crude oil industry. Its fleet currently consists of eight modern very large crude carriers (VLCCs) and six modern Suezmax tankers. (Source: “Our Business,” Okeanis Eco Tankers Corp, last accessed March 12, 2024.)
As of the end of 2023, the company’s 14 vessels had an average age of four years and an aggregate capacity of approximately 3.5 million deadweight tons. (Source: “Fourth Quarter and Twelve Month Period 2023,” Okeanis Eco Tankers Corp, last accessed March 12, 2024.)
Record-High 2023 Revenues, EBITDA, & Net Income
The Houthi attacks on ships in the Red Sea didn’t start until October 2023, and no one knew how long the conflict would last. As a result, higher TCE rates didn’t really kick in until the start of 2024.
That helps explain why Okeanis Eco Tankers Corp’s fourth-quarter 2023 results were a little underwhelming. The company still managed to report record full-year 2023 results, though.
Okeanis Eco Tankers’ TCE revenues in the fourth quarter were $58.4 million, down from $82.2 million in the fourth quarter of 2022. (Source: “Q4 2023 Earnings Presentation,” Okeanis Eco Tankers Corp, February 29, 2024.)
Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) went down from $69.8 in the fourth quarter of 2022 to $44.2 million in the fourth quarter of 2023.
The company’s fourth-quarter net income came in at $21.3 million, down from $48.4 million in the same prior-year period. Not surprisingly, its fourth-quarter earnings per share (EPS) also took a hit, having gone down year-over-year from $1.50 to $0.66 per share.
Okeanis Eco Tankers Corp’s adjusted earnings went down from $48.6 million in the fourth quarter of 2022 to $20.4 million in the fourth quarter of 2023.
The company’s daily TCE rate for VLCCs was $45,200 in the fourth quarter of 2023, down from $65,400 in the fourth quarter of 2022. Its daily TCE rate for Suezmax vessels was $45,600 in the fourth quarter of 2023, down from $61,600 in the fourth quarter of 2022.
The company’s daily operating expenses increased from $8,369 in the fourth quarter of 2022 to $9,105 in the fourth quarter of 2023.
On the plus side, Okeanis Eco Tankers Corp delivered record-best financial results in full-year 2023.
The company’s full-year TCE revenues advanced 54% to a record-high $297.8 million, while its full-year adjusted EBITDA went up by 63% to a record-high $241.5 million.
The company’s net income went up from $84.6 million in 2022 to $145.3 million in 2023. Its EPS went up from $2.63 in 2022 to $4.51 in 2023.
Okeanis Eco Tankers Corp’s adjusted earnings went up by 72% in 2023 to a record-high $145.0 million, or $4.50 per share.
The company’s VLCC daily TCE rates went up in 2023 by 70% to $61,700, while its Suezmax daily TCE rates grew by 25% to $55,900. The company’s fleetwide daily TCE rates went up by 48% to $59,300.
Okeanis Eco Tankers’ daily operating expenses went up in 2023 by 10% to $9,069.
The company ended the year with total cash of $54.9 million and a total debt of $693.3 million.
The outlook for Okeanis Eco Tankers Corp is solid. As of February 29, 76% of the company’s available VLCC spot days for the first quarter were booked with an average TCE rate of $73,900 per day, and 88% of its available Suezmax spot days for the first quarter were booked with an average TCE rate of $58,800 per day.
Okeanis Eco Tankers Corp Distributes 100% of Its Free Cash Flow
Okeanis Eco Tankers’ quarterly distribution fluctuates based on the company’s free cash flow (FCF).
Management reported net cash provided by operating activities of $3.8 million for the fourth quarter of 2023 and $174.0 million for the full year. The company had cash and cash equivalents of $50.0 million at the end of 2023.
In February, the company’s board declared a fourth-quarter dividend of $0.66 per share, to be paid on March 22. (Source: “Okeanis Eco Tankers Corp. – Key Information Relating to 4Q23 Capital Distribution,” Okeanis Eco Tankers Corp, February 29, 2024.)
That translates to a yield of 19.38% (as of this writing).
Okeanis Eco Tankers Stock Has Provided Massive Returns to Investors
Although marine shipping stocks can experience volatility based on where we are in the economic cycle, Okeanis Eco Tankers Corp’s spot market TCE rates for VLCCs and Suezmax tankers has seriously outperformed those of its peers.
That has helped ECO stock provide incredible total shareholder returns since its initial public offering (IPO) on July 3, 2018.
Since then, with dividends reinvested, Okeanis Eco Tankers stock has provided total returns of 693% (as of this writing). If investors had decided to cash in their dividends instead of reinvesting them, their total return would be 313%. In comparison, over the same time frame, the S&P 500 has only rallied by 89%.
Recently, ECO stock has been outperforming the broader market, up by 72% over the last year and 8.75% year-to-date (as of this writing).
Chart courtesy of StockCharts.com
The Lowdown on Okeanis Eco Tankers Corp
Okeanis Eco Tankers is a fabulous marine shipping company that recently reported record full-year results and provided its seventh consecutive quarterly distribution. Although it reported softening TCE rates in its VLCC segment for the fourth quarter, it was still able to report highly profitable voyages.
In the first quarter of 2024, the overall marine shipping market has been very strong for both of the company’s tonnage classes (VLCC and Suezmax). Moreover, instability in the Red Sea will continue to result in longer voyages (almost 40% longer) and increase the demand for Okeanis Eco Tankers Corp’s vessels.
All that adds up to good news for Okeanis Eco Tankers stockholders.
