Exmar NV - An Underpriced Cash Cow

EXMAR held a Board of Directors meeting on March 28, 2023, to review the results for the year ending on December 31, 2022.

In 2022, EXMAR completed the sale of its floating liquefaction barge TANGO FLNG to Eni, and signed a 10-year charter agreement with Eni for EXCALIBUR, now fully owned by EXMAR. With the proceeds from the sale, EXMAR became net debt free. EXMAR also started generating charter income from the FSRU EEMSHAVEN LNG from August 2022. Additionally, the company ordered two innovative 46,000 m3 Midsize LPG/ammonia carriers with dual fuel LPG propulsion.

In March 2023, EXMAR announced that it had ordered two more innovative 46,000 m3 Midsize LPG/ammonia carriers, which can be powered by ammonia fuel. The company also reported the closing of the sale of the floating liquefaction barge TANGO FLNG to Eni, a 10-year charter agreement signed with Eni for EXCALIBUR, and becoming net debt free after receiving proceeds from the TANGO FLNG sale in August 2022. Additionally, EXMAR has started receiving charter income from FSRU EEMSHAVEN LNG since August 2022 and has sold and delivered the LPG carrier BASTOGNE, which was built in 2002.

The company reported consolidated results for December 31, 2022, and December 31, 2021. The revenue increased from $148.2 million in 2021 to $155.6 million in 2022. EBITDA also increased from $51.3 million in 2021 to $341.6 million in 2022. The operating result (EBIT) increased from $2.4 million in 2021 to $312.8 million in 2022. The net finance result was -$23.4 million in 2022, compared to -$10.6 million in 2021. The company had a result for the period of $320.3 million in both 2021 and 2022, with a group share of $320.3 million.

EXMAR provided an update on its fleet of gas carriers in its 2022 year-end review. The company's VLGCs and MGCs continued to perform well under their current contracts with Equinor, and the MGC market experienced a rate uplift due to increased LPG production, particularly in the USA. EXMAR sold and delivered the LPG carriers EUPEN and BASTOGNE, and signed newbuilding contracts for two innovative 46,000 m3 Midsize LPG/ammonia carriers with dual fuel LPG propulsion. In March 2023, the company ordered two additional 46,000 m3 Midsize LPG/ammonia carriers and is considering equipping them with dual fuel ammonia propulsion. EXMAR's pressurized fleet remained dedicated to well-established partners in Europe and Asia.

In 2022, EXMAR's Infrastructure segment revenue decreased by USD 12.3 million compared to the previous year due to the absence of charter income and early termination fee from the previous year. However, new contracts with Gasunie and Eni started delivering revenue in the second half and fourth quarter of 2022, respectively.

In March 2022, EXMAR secured a five-year charter agreement for its floating storage and regasification unit (FSRU) S188 with GASUNIE. As per the contractual stipulations, hire income began from mid-August 2022, and the FSRU S188, now renamed EEMSHAVEN LNG, started commercial operations in October 2022. In 2021, the EEMSHAVEN LNG had an impairment charge of USD 19.0 million due to its unemployment, but in 2022, the market significantly improved, and USD 18.3 million was reversed.

On 5 August 2022, EXMAR sold the shares of Export LNG Ltd, the owner of TANGO FLNG, to Eni for USD 646.7 million, positively impacting EBITDA and EBIT by a gain of USD 315.7 million. Eni plans to use the TANGO FLNG in the Republic of Congo and also agreed to a 10-year charter for a Floating Storage Unit (FSU) based on the conversion of an LNG carrier. EXMAR acquired the 50% share of the LNG carrier EXCALIBUR from joint venture partner SEAPEAK to fulfill this contract with Eni. These contracts with Eni have contributed to EXMAR's revenue and EBITDA since the fourth quarter of 2022.

EXMAR's accommodation and work barge NUNCE provided high-standard services to its customer offshore Angola, and its contract has been extended until May 2023. The accommodation and work barge WARIBOKO is available for new services.

EXMAR's engineering subsidiaries are seeing high utilization of project management and engineering services supporting various contracts for the development and implementation of different deep-water offshore developments, mainly in the Gulf of Mexico. Additionally, EXMAR concluded a contract with Eni for engineering services related to the Congo project.

Some key points from the financial information provided:

- As of December 31, 2022, EXMAR had a net financial debt of USD 105.2 million, compared to a net cash position of USD 492.0 million at the same time in 2021.

- The proceeds from the sale of Export LNG Ltd (which owned the TANGO FLNG) were used to partially repay the outstanding loan to Bank of China and to repay and terminate the Sequoia credit facility.

- The financial impact of the Gasunie and Eni contracts for EXMAR's Infrastructure segment started to be reflected in the company's revenue and EBITDA from the second half of 2022 and the fourth quarter of 2022, respectively.

The Board of Directors proposes to the General Meeting of Shareholders on 16 May 2023 to distribute a gross dividend of
EUR 1,0 per share. The net dividend amounts to UR 0,70 per share (after deduction of 30% withholding tax) .
Ex date : 22 May 2023 – Record date : 23 May 2023 – Pay date : 24 May 2023"

In this case, the proposed gross dividend per share is EUR 1.0. After deducting the 30% withholding tax, the net dividend per share is EUR 0.70.

So the dividend yield is:

(0.70 / 8.66) x 100% = 8.09%

Investing in a debtless company can be attractive because it indicates that the company has a strong financial position and may be less susceptible to financial difficulties. However, it's important to note that being debtless doesn't necessarily mean that a company is a good investment. There are other factors to consider such as the company's growth potential, profitability, competitive advantage, and management team. It's important to conduct thorough research and analysis before making any investment decisions.

Hopefully this summary provides a deeper understanding of where the company is heading in 2023!


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