Pirmadienis, 20 gegužės, 2024
US Stocks

Frontline Plc Shares

Frontline Plc is one of the world’s largest and most renowned oil tanker owners and operators. The company was founded in Norway in 1984 as Frontline AB and specialized in the transportation of oil products by ships worldwide. Currently, the company is registered in Cyprus.

The main activities of Frontline Plc include:

  1. Operation of oil tankers: Owners and operators of Frontline Plc manage a vast fleet of ships dedicated to the transportation of oil products. Their vessels operate on an international scale, carrying oil products from oil reservoirs and refining companies to consumers all around the world.
  2. Shipping logistics: The company provided logistics services related to the transportation of oil products. This includes managing cargo terminals, planning shipping routes, and other logistical services.

It is necessary to mention that the high price of oil can affect the profit and operations of Frontline Plc, as its business success depends on the conditions of the oil and maritime transportation industry.

At the end of 2022, the company’s fleet consisted of 70 ships with a total capacity of approximately 13.1 million deadweight tons (DWT). In the beginning of 2023, the company was supposed to receive two more newly built ships.

Activity sectors:

1. Voyage charter. Voyage charter is an agreement-based ship rental, and the payment within it is determined based on the cargo tonnage rate, occasionally a fixed fee. The charterer assumes responsibility for the cargo and other nuances. The contractual and actual payments can differ. Therefore, revenue forecasts are reviewed and updated throughout the duration of the entire shipping charter. In the shipping charter agreement, revenue recognition begins at the moment when the ship starts to load cargo.

The lessee covers the costs of ship and navigation, so it’s important to specify in the contract which costs comply with the terms of the agreement. Then, the lessee will cover those costs. They use the ship as much as they need.

2. Time charter. Tai tokia nuoma, kai laivas nuomojamas konkrečiam laikui. Į sutartį įeina tokios laivo charakteristikos kaip greitis. Nuomotojas tokiose sutartyse turi teisę neleisti laivui plaukti į tam tikrus uostus, regionus, negabenti sutartyje nurodytų krovinių. Laivo ir laivybos išlaidas dengia nuomotojas.

3. Administrative income. Administrative income sources include the income derived from the commercial and technical management of related and third-party vessels, as well as the supervision of new navigation, taxes, and fees from related and third-party countries.

4. Kiti pajamų šaltiniai. The various sources of income are related to the receipt of profits from the sale of ships; cash flows related to the processing of cases (including the execution of insurance and legal claim contracts); profits and losses from the termination of contracts before the contract term expires, which are accounted for by canceling the value of the right to use leased property and the lease obligation, with profit or loss recognized due to the difference; profits and losses from income sharing and other income sharing agreements, when the company is considered the principal under lease agreements and travel revenues and expenses are recorded as net income or losses, with necessary adjustments arising from the income sharing agreement.

Income by sector:

Pajamos pagal sektorius
Income by sector

Finance

The 2022 shareholders’ meeting increased the Initial capital to 600,000,000 USD (600 million shares at 1 USD each).

The average annual growth of Income over 10 years reaches as much as 9.54%. This is a very good growth rate. The net profitability in the year 2022 exceeded 33%. Unfortunately, the company’s annual profit dynamics are very unstable – profit replaces loss years. This is not a stock for a conservative investor.

During positive years, the Net margin was high, staying well above 12%. The Gross margin is also high, we would just prefer more stability in it. However, it’s evident that the company is performing very well in its business operations. The Asset and Equity yield for such a large company is high. We like that.

Covering of expenses and debts in Gross and Operating profits is below the threshold of a Prudent Investor. Solely for the covering of Long-term debts, the net profit of 2022 would suffice for 0.22 years. Quick liquidity is >2. Bankruptcy risk Z-Score – nearly 5. These are very high indicators, showing that we are dealing with a company occupying strong positions in the market.

If the company owners would like to sell the company and invest the money into 10-year US Treasury bonds while achieving the same return as the company, then they should sell the shares at $56 USD (at the time of writing, the market price was $16.49 USD).

Investment scoreboard:

Investment scoreboard
Investment scoreboard

Frontline Plc shares

The company’s stocks are traded on the NYSE and Oslo Stock Exchange under the ticker FRO.

The company doesn’t buy back its own shares on the Stock market, but it pays solid dividends. The dividend yield of the U.S. listed stocks is nearly 10% at the time of writing. The dividend yield of the stocks listed on the Oslo Stock Exchange is 16%. The stock price in Norwegian Kroner is 168.26 NOK. But we need to note that the size of the paid dividends tends to decrease. Over the past 10 years, dividends have decreased on average by 25% annually.

Standard deviation of stocks (YoY) is 27%. Relatively, this is a low-risk stock, especially with a beta of 0.27. The price projection calculated by the GRAPES method is 27 USD. We do not provide price projections using our method, as this is not what is referred to as a Intelligent investor stock.

Meanwhile, in your portfolio, there might be these stocks for diversification and potential cash flows from dividends. And if you’re fond of transportation, especially shipping company stocks, then these are certainly not a bad choice. Moreover, with our calculated PEG ratio being 0.41, it’s a very good indicator. The Stock Risk Premium at the time of writing is 1.94%.

Stock price:

Company’s site

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