NEW YORK (TheStreet) -- Knightsbridge Tankers (VLCCF) surged to a one-year high of $13.22 as of 3:06 p.m. on Tuesday after the company announced it would purchase six Capesize bulk carriers and would issue shares to two other companies.
Knightsbridge announced Monday that it would five fuel efficient 180,000 DWT Capesize bulk carrier newbuildings from Frontline 2012 and one Capesize bulk carrier built in 2013 from Karpasia Shipping. Knightsbridge will pay $61 million for each of the five Capesize newbuildings and $55 million for the Capesize built in 2013. Of the $360 million total, $186 million will be paid in shares of Knightsbridge at $10 per share, $150 million in absorption of remaining newbuilding capex and $24 million in cash.
As part of the deal, Knightsbridge will issue 15.5 million shares to Frontline 2012 and 3.1 million shares to Karpasia.
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TheStreet Ratings team rates KNIGHTSBRIDGE TANKERS LTD as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate KNIGHTSBRIDGE TANKERS LTD (VLCCF) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 1190.9% when compared to the same quarter one year prior, rising from -$0.28 million to $3.01 million.
- The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels.
- Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 64.35% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.7%. Since the same quarter one year prior, revenues slightly dropped by 0.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, KNIGHTSBRIDGE TANKERS LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: VLCCF Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.