Wed June 28, 2017
John Fredricksen, owner of Frontline LTD FRO the number 4 Very Large Crude Container line, is buying more ships. See the
article in today's WSJ. This is a bet that oil prices are or are near a bottom so that shipping will improve.
The billionaire is looking to spend more than two billion dollars in acquisitions. He is looking to buy companies rather than buying tankers from rivals.
Given the depressed state of the shipping industry this sounds smart.
Frontline FRO - Weekly
The main panel is FRO, Frontline. I used the price of Brent as more representative of the cargo of FRO. As one can observe there is a high positive correlation. In fact, FRO then fell and peaked well before the last decline in oil. And now both go begging for buyers.
I made the case in the Monday post that oil prices have a symmetry, up from 1999 to 2008, then down for the same nine year span into 2017.
FRO has done the same as one can observe on the twenty year chart below.
FRO Monthly 20 Years
The same symmetry exists for FRO. I do not expect oil to return to $140 any time soon, if ever. But who knows, a war in the Middle East would go a long way towards boosting price. Russia is already claiming the skies over Syria telling the US where it can and cannot fly, see the interview with John Bolton in the last weekend WSJ Editorial Report on Fox TV.
So I logged into Finance.yahoo to obtain the vitals for FRO.
Frontline
Imagine my shock and awe to discover it pays a 10.87% dividend. Can this continue?
Looks like it can, the link to the Cash Flow Statement is here.
https://finance.yahoo.com/quote/FRO/cash-flow?p=FRO
FRO has generated substantial cash from operations in each of the last three years!
Overall cash flow is negative but that is because, as the article says, FRO spent $578 M on investments in 2016.
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