Friday, February 7, 2014

Diana Containerships Inc. - Earnings Preview 2013-Q4

I estimate that Diana Containerships Inc. (DCIX) will report a net loss of ($19,400,000) or ($0.57) basic loss per share for the last quarter of 2013. The company’s bottom line for the quarter has been affected by three one-time events:

In December the company sold for demolition the 18-year old Spinel (formerly APL Spinel) for $9.65 million. I estimate the loss on the sale of Spinel will be $11.5 million (including $1 million in direct sale and other charges). In addition, the company just announced the demolition of 18-year old Sardonyx (formerly APL Sardonyx), a sister ship to Spinel, for $10 million. I anticipate that DCIX will record the approximately $9.2 million impairment loss for Sardonyx in the fourth quarter, to start with a clean slate for 2014.
Finally, the company had a gain of approximately $660,000 from the early redelivery of Spinel. 

Excluding these three events and based on my estimates, DCIX would record a net gain of $640,000, or $0.02 basic earnings per share. Based on cash generated from operations during last quarter, I expect that Diana Containerships will declare a quarterly cash distribution of $0.15 per share, unchanged from the previous two quarters.

After the disposal of Spinel, the company will own a young fleet of seven vessels plus the 18-year old APL Garnet.

Since last April and including the sale of Spinel, Diana Containerships will have disposed of five vessels for a total book loss of almost $60 million. I do not anticipate any further demolitions during 2014, since the APL Garnet is on a lease back charter with Neptune Orient Lines with earliest expiration in August 2015.

Diana Containerships has total indebtedness of $148.7 million, including $98.7 million from its $100 million credit facility with RBS and a $50 loan from sister company Diana Shipping Inc. (DSX). The $100 million credit facility matures in January 2017, whereas the $50 million loan is due in August 2017.

The shares of Diana Containerships are traded on the New York Stock Exchange and closed on Friday at $3.99 per share. Its current market capitalization is approximately $136 million.

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