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Monday, December 19, 2011

Seaspan Corporation – (SSW) Top Stock to Buy 2012 ?

Nice Surprise From Seaspan
Shares of Seaspan soared last week on news of the shipping company's tender offer for 10 million of its shares (ticker: SSW) at $15. That price is almost 44% above the stock's closing quote on Monday, the day before the announcement was made, and 13% higher than the $13.28 it was trading at when Barron's wrote favorably about the company two months ago ("Navigating Rough Seas," Oct. 17).

CEO Gerry Wang said the offer "reflects our confidence in the company's future prospects and, we believe, is an efficient way of returning capital to shareholders."

Our article noted Seaspan's strong business plan, sound financials and good dividend, now yielding more than 6%. Despite global economic sluggishness, its 65-ship fleet is fully leased out, with a remaining average charter period of seven years.

Seaspan's fleet is fully leased out, with a remaining charter period of seven years.
Wells Fargo shipping analyst Michael Webber views the announcement as "a material positive for [the] shares, particularly given that management will not be participating in the offer…."

The transaction will be executed on a pro-rata basis, meaning that if investors tender, say, 20 million shares, the company will buy half the number each investor has tendered as of midnight, Jan. 11, 2012.

And because Seaspan's free float is 47.4 million shares, investors do run the risk of having only a portion of their shares accepted. That helps explain why the stock isn't trading closer to the tender price.

In any case, the announcement has set up an arbitrage. Even if only half of an investor's shares are purchased, the return would be substantial, particularly for anyone who bought the shares in the past two months. Friday, the stock closed at $13.14.

-- Eric Uhlfelder
Seaspan Corporation (Seaspan) is an independent charter owner of containerships, which the Company charters pursuant to long-term, fixed-rate time charters agreement. As of March 25, 2011, it operated a fleet of 58 containerships (including three leased vessels) and had entered into contracts to purchase an additional seven containerships and to lease an additional four containerships. As of March 25, 2011, the average age of the 58 vessels in its fleet was approximately five years. Customers for its operating fleet are China Shipping Container Lines (Asia) Co., Ltd. (CSCL Asia), Hapag-Lloyd USA, LLC (HL USA), A.P. Moller-Maersk A/S (APM), COSCO Container Lines Co., Ltd. (COSCON), CSAV, MOL, K-Line and UASC. Customers for the additional 11 vessels will include K-Line and COSCON. As of March 25, 2011, 22 of the 69 vessels in its current or contracted fleet were chartered to CSCL Asia, and 18 vessels were or will be chartered to COSCON.
Seaspan Corporation – (SSW)

Seaspan owns a fleet of container ships and enters into charter agreements to transport products around the world. They have almost 60 vessels which have an average age of 5 years.

SSW has a price to book ratio of .68 a forward P/E of 8.9 and a PEG ratio of 5.85. Their dividend yield is 5.9% and their 5 year dividend growth rate is 14.3%.

Out of the whole list on a recent news release from Seeking Alpha Seaspan has the highest dividend growth rate of the other stocks listed.

This alone is worth an entry point at this level.

I see a firm support line forming above 12.50 and might be a point to add more.
The Board and management are very pleased with how the business has performed and going forward we feel very comfortable that the business will continue to perform throughout the cycle. The Board certainly had identified a progressive dividend policy and we are looking to grow that dividend over time.

So in terms of guidance going forward, I think that we can’t give you clear guidance however we’ll move to more regular process in terms of a dividend and set up quarterly, more regular in terms of likely annual dividend reviews.

So I think that there is room to grow the dividend and for it to be sustainable. We don’t have guidance today but certainly we expect in the near that we’ll reaffirm where the event will be."

                    Sentiment : Strong Buy     
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