Taylor Maritime Investments (TMI) $1.39

Gain to date: 7.6%

We recommended buying Taylor Maritime (TMI) last October at a price of $1.31 following its highly successful IPO (initial public offering) in June 2021.

Our thesis was that with the seaborn freight market booming as the global economy got back on its feet, volumes and charter prices would continue rising along with the share price.

WHAT HAPPENED SINCE WE SAID TO BUY?

The shares have continued their strong performance, along with the underlying business. They hit a high-water mark of $1.50 in early May and then dropped to $1.20 in late June as world markets slumped before recovering to $1.50 again at the beginning of August.

The outbreak of war in Ukraine had little direct impact on the company as it had hardly any exposure to the country or to Russia, but it has had a big indirect effect as Handysize (a naval architecture term for smaller freight vessels and oil tankers) shipping rates soared by nearly 50% in the first quarter.

Also, due to a shortage of new ship building capacity, prices for second-hand vessels went through the roof enabling the firm to sell off several of its original ‘seed assets’ at a significant profit, generating an IRR (internal rate of return) of more than 100%.

At the same time, the firm has taken major steps to transform itself buying a significant minority stake in Grindrod Shipping (GRIN:NASDAQ) for $77.9 million.

Grindrod owns a fleet of 25 modern, geared dry bulk vessels (with on-board cranes to unload their cargo) which is highly complementary to Taylor Maritime’s own portfolio, so much so that the Guernsey-based group has now decided to bid for the whole company, a deal which we estimate will cost it around $365 million.

WHAT INVESTORS SHOULD DO NEXT?

With the global Handysize fleet expected to contract in size over the next couple of years, the value of the company’s fleet will only continue to rise along with charter rates, especially after the Grindrod deal.

Buying Taylor Maritime each time the shares pull back has been a winning strategy in the past and we suggest investors free up some cash elsewhere in their portfolio to top up again at current levels.

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