Scorpio Tankers Inc. (STNG) Is Bullish on the Tanker Market, But Is it Right?

Page 1 of 2

Scorpio Tankers Inc. (NYSE:STNG), led by shipping veteran Robert Bugee, is looking to become the biggest force in the tanker market after buying much of the global capacity for tanker production for the next few years.

Scorpio Tankers Inc. (NYSE:STNG)

The company currently owns 15 vessels and operates an additional 25, which are chartered. Scorpio Tankers Inc. (NYSE:STNG) also has 54 new vessels on order and holds about 60% of the worldwide contracts to build LR2 longer range tankers and 25% of worldwide contracts to build medium range tankers. The company believes that by ordering a fleet of similar, longer range vessels, it will be able to achieve better economies of scale.

The global tanker market has been suffering from chronic oversupply problems during the past few years, and although the market is starting to pick up again, part of the reason for its pick up is a reduction in the number of ships being produced. Scorpio Tankers Inc. (NYSE:STNG)’s management believes that demand for oil and refined product transportation will pick up rapidly over the next few years as demand in Asia and Latin America grows.

However, the rest of the industry is not so sure and the CEO of Nordic American Tanker Ltd (NYSE:NAT) has clearly stated that a rise in shipping rates will only happen if there is a significant reduction in ship capacity. Some orders left over from 2007/2008, when the market was at its peak, are only just starting to be delivered and ship production was in-line to begin tapering off next year, but with Scorpio Tankers Inc. (NYSE:STNG)’s extra bullish bet, this could be about to change.

Can Scorpio support the extra ships?

It would appear that Scorpio can afford to take on the extra debt that it needs to be able to fund the ships. The company increased its borrowing by 23% from Q4 2012 to Q1 2013, but still managed to reduce its debt to equity level while increasing its net cash position (this was done by issuing additional equity).

Scorpio Tankers Inc. (NYSE:STNG) is also in one of the best positions financially out of all the tanker companies on the market. Unlike Nordic American Tanker Ltd (NYSE:NAT), which has a negative view on the tanker market in the short-term, Scorpio made a small Q1 2013 profit, the first time since 2009! Meanwhile, Nordic American Tanker Ltd (NYSE:NAT) incurred a huge $32 million loss on revenue of only $17.3 million.

Company Cash Debt Debt to Equity Q1 2013 Debt to Equity Q4 2012
Scorpio $400 $175 20% 34%
Nordic American $23.6 $250 32% 31%
Teekay $172 $1,873 290% 270%

Figures in $U.S. millions

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!