I think it might be worth keeping a close eye on a relatively new specialist asset leasing fund listed on the London market called Tufton Oceanic Assets which is trading up a bit today at 80c a share with a market cap of around £165m. On my calculations, its trading at just under a 20% discount and yields just under 9%.
It recently put out numbers which showed that the fund per share NAV at 31 March 2020 was $0.969. These results showed a 0.7% decline since the end of February and a total return of -0.6% over the quarter since December 2019.
Other key metrics mentioned in the fund report is that the average charter length of the portfolio is c.3 years and vessels which have charters expiring in the next six months represent around 16% of NAV. The manager expects there to be minimal or no void time between charters.
Crucially the fund’s share price decline seems to be out pacing declines in the Dow Jones Global Shipping Index (ticker: DJGSH) which is down 20.3% (over the same period the fund was down 22%) and the S&P 500 down 15.8% over the same period.
Liberum’s own analysis on this update reports the “gradual increase in demand for goods from Japan and South Korea has slightly improved global shipping activity and increased oil production has helped boost demand for oil tankers. Despite this, reports suggest that US ports expect cargo volumes to decrease by up to 20% in Q1 2020.”
The chart below gives us a wider historical context for these numbers. It shows the Baltic Dry Index over the last 25 years – at this point when I looked at the index was at 616. We are now well below average long-term levels and close to all-time lows, bar a sudden downward spike in early 2018.
Obviously Tufton has a range of shipping assets that don’t always fit into the Baltic Dry Index context. And I think its also fair to say that recent events might end up resulting in some roll back on globalisation, with lower global trade levels. But we are not far-off all-time lows both for the shipping industry and for this fund. We also have solid leasing income with real asset backing, all at a sensible discount.
I’m not quite sure I’d make this into a buy just yet and I would prefer the share price back below 75c a share which I think could happen if the markets take another dive.
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