Ship Finance releases 1st quarter numbers

Posted by Tim

May 23, 2008

Ship Finance International Ltd (SFL: 28.46 +0.84 +3.04%) came out with their formal 1st quarter earnings and conference call yesterday. This follows the announcement of a new mega-lease deal and dividend increase announcement a few days earlier. As expected Ship Finance had a fine quarter with good news for the future.

First up, the dividend: A little different from what I read into the earlier press release, the 1st quarter dividend will be 56¢, up a penny from Q4, and the dividend will be increased to 58¢ in the 3rd quarter. This give an total increase of 12¢ per year going forward, a 5.5% increase on the current dividend. On the conference call, management indicated they are working toward future increases.

Net cash flow per share came in at $1.96 including 46¢ of profit share and net income of 82¢ for the quarter. The cash flow was up 14% from the 4th quarter of 2007 and show the effects of the company’s continued growth of their fleet. Also, there is definitely plenty of coverage for the dividend.

Included in the quarter’s earnings was $33.7 million in profit share from Ship Finance’s agreement with Frontline (FRO: 60.02 +0.02 +0.03%). This agreement pays SFL 20% of the revenue above a fixed daily rate FRO earns on the 39 tankers FRO has financed through SFL. This amount is over double the profit share earned in the Q4, 2007 and tanker spot rates are higher in Q2 and projected higher for Q3 and Q4. Ship Finance earmarks the profit share money as capital for ongoing fleet expansion. Over the last 4 years the fleet has grown from a value of $2.1 billion, all oil tankers, to 73 vessels worth $7.0 billion and half in dry bulk, container and off shore. There is currently $1.5 billion of new buy/lease business on order.

I believe Ship Finance offers a great combination of growth, growing income and conservative management. I expect to be holding shares in this company for a long time.

Note: I have a long position in SFL.

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