Avance Gas Holding Ltd

Thank you, everybody, for joining our webcast today. We have some exciting news for you all, which you might already be aware of. I'm joined as usual by our CFO, Randi Navdal-Bekkelund, who will run you through the financials a bit later in the presentation. Just to remind you, you can also ask questions either by the chat or by the chat function. And once we conclude the presentation, we will do some Q&A. in case there are some questions to today's presentation. Before we begin, I'm just going to remind you about our disclaimer. We will be giving some forward-looking statements and use non-GAAP measures like TCE. And there are limits to how many details we can cover in this presentation, so I recommend that you read the presentation together with the earnings release, which we also published today, this morning, 7 o'clock. So let's kick off. I think one of the big highlights today is the dividend. We've been ramping up the dividend quite a lot the last couple of years. And for this quarter, we are prepaying some of the gains we are booking for the BW transaction. So back in 2022, we paid $1.1. We almost doubled that in 2023, $2.15 per share. And then given the sale gains we recorded in the first quarter of this year, we actually paid off the same number, $2.15 per share, 165 million in total in just one single quarter. We paid off 135 in Q2. We also had some sale gains in that quarter. So altogether, for the first half of the year, we paid out $3.50 or $268 million. With all of the fleets now sold, we don't see any reason for you guys to be waiting for the money. Interest rate for dollar is not zero anymore. It's actually quite attractive returns on cash. So in contrast to when cash was trash, cash actually is king these days. So we don't see any need for you to be waiting for this money. So we are prepaying some of the gains. And we are paying $3.50 in dividend just for Q3 alone for $268 million, which gives our payout ratio of around 10 times earnings. So that's why we included the Galaxy Brain meme showing the serotonin and dopamine levels of, I hope, most of the advanced investors. So dividends following the Fibonacci rule, where you have quite a few doublings there. Okay, let's go to the other highlights for the quarter. In terms of great income, we are delivering numbers in line with guidance. Discharge to discharge numbers, which is the number we focus the most on, $38,700. Slightly higher on our low to discharge basis as rates were softening during the quarter. That resulted in a net profit for the quarter, $25.8 million. or earnings per share of 34 cents, which is a pretty good number, given that this is a number which excludes any gains from sales. It's just pure freight income. Q4, a bit softer. It's also been a bit more difficult for us to fix the ships. We announced the sale of the VLGC fleet to VW on August 15th, and this market is very much broker-driven, which means that the brokers get the cargoes and they are calling people around and when we are saying that we are divesting the VLGC fleet, we are not really the first guys the brokers will call, which could be an advantage in a rising market because then you would be fixing on higher numbers, but in a softening market, it entails waiting time and we are thus delivering We have booked TCE numbers for around $28,000 per day for that quarter. Keep in mind, we are also delivering some ships to BW. We already delivered four ships. We have one more ship scheduled for this week, and then the remaining ships scheduled for the rest of the year, higher new year. So we are only booking about 67% of our capacity in Q4, which is okay because market's been pretty soft. But we are booking the ship. and delivering them once they are discharged to BW. And then the big news today, except for the dividend maybe, is the sale of the MGCs. For those who are followers, for some time we did a speculative order of two plus two MGCs last summer. So we did the two first shifts during north shipping, and then we did two more shifts in August last year. We paid about $50 million in yard installments backed by bank guarantees. And we are selling them today at $282.4 million or $70.6 million, booking a gain of around $34 million on this sale. And these ships will then be novated to Exmar, which is a big player in the MGC space. They have a big fleet on water. They have a big order book. We really do see that they have a higher value of owning these ships, that they can consolidate. Being a listed shipping company with only four ships, it would not be that investable. So we found a very good owner for these ships, who I'm sure is going to be satisfied with the ships. The ships are ultra-modern, dual-fuel, ships with charge generators, so they will fit very well into the portfolio of Exmark. Once we have all the paperwork in order, we will get refunded for the yard installments that we have paid, currently about 50 million. And then we will have our milestone payment once the steel cutting occurs for the fourth new building, which is scheduled for April next year, where we will get 34.2 million as the last payment. And that's why we're also there today announcing that we are Closing down Avanscat, it's been a fantastic journey. We have sold, we started the year with 20 ships. We are closing it now with zero. We sold four wheeled disease in the first half of the year, 12 ships to BW and now four ships to Expo. In terms of the BW deal, as I mentioned, things are progressing according to plan. Four ships delivered. We have scheduled one more ship for delivery this week and then the remainder in December. When we announced the deal, we were expecting a profit of $315 million. As the BW stock has slumped a bit, we are now at the estimate of $296 million, still a very nice profit. And we do think that getting settlement in BW shares where we will become the second biggest shareholder with a 12.88%. percent shareholding is attractive, given where that stock is trading today, and I will cover that in more detail later in the presentation. Then, again, with declaring the dividend, $3.50 per share, $268 million, and this is to be paid on the day before Christmas, December 23rd. Following this payment, we expect to have performer cash of $264 million, and then the So there will still be some nice dividends there for shareholders. We intend to pay everything out in a timely and cost efficient manner. And that's why we also are planning to close the shop so we can avoid any more audit, legal fee, listing fees and all the costs associated by running a company. So we intend to call a special general meeting to reduce the capital and wind up the company and pay everything out to our shareholders. So looking then at the next slide, a summary of the transactions we have done, paying off the dividend on 23rd of December, 23 transactions. We did three of those in 2022, selling off some of the older ships, generating a profit from those transactions of around 20 million. And then we have around $450 million in gains from the sale of 20 ships this year. On this slide, it says gains 490 million. It's really that we have reduced that value by 20 million because the BW stocks come from the 17.25 dollar per share, which means we think it's a fair value compared to around $13 today, but still $1.8 billion in sales for these ships with a considerable gain and then also a pretty big cash release, which the shareholders are benefiting from now by us paying it out as dividend and return of capital. Looking a bit more into detail on the recent transaction being the MGC, as mentioned, contracted $248 million, contracted June and August last year. We haven't incurred much supervision costs. Really, the building phase is ramping up now. First ship is due for delivery Q4 next year, and then Q1 and Q2 and Q4. And then we are novating these to Exmar and making a pretty good return on this investment, and where we do think that these ships, once we have scaled on our business activity, these ships, it has a better home with Exmar, first-class operator of this kind of asset. Commercial guidance and performance, we are spot on what we guided. We guided 79% books at 41,400 in August. The market softened a bit in September, so we're ending up at 38,700. Slightly better on the low to discharge, 41.9. And then for Q4, as I mentioned, the market's been a bit soft, and for us, it's been a bit more challenging fixing out the shifts given the fact that we are leaving the business. We have booked the 67% of the available days now, taking into account that we are delivering ships to BW, doing slightly better on the TC, close to 40,000 on those. Spot's been pretty dismal, 23,800 we do expect on the spot days for this quarter. So then looking into the dividend once again, we put Algor on the, Sizzle lift in Q1 when we ramped up the dividend from $0.65 to $2.15 in one quarter, down again to $1.35 in Q2. And then we're taking the helicopter up to $3.50 on the Q3. And you do see that we are deviating a bit there in terms of dividend per share compared to earnings per share, both in Q2 and Q3. And this is really about prepaying the gains. We like the shareholders to get the money. They belong to shareholders. They don't belong to us. So we are distributing the dividend prior to us booking these gains so that the investors can have the benefit of having this money given where interest rates are and where there are pretty good opportunities in the market given the slump in especially shipping stocks and energy stocks these days. So once we have paid out this $268 million, what remains? We do expect to have a free cash flow in Q4 of around $20 million. giving us a performer cash close to the dividend, $264 million. And then we have this 19.3 million BW shares, currently valued around $250 million. We do think they look compelling at this stock price, which means that we can distribute slightly more than a half a billion dollars yet to be distributed to shareholders. We will distribute most of this when we are reporting in February, the lockup on the BW stock will then have collapsed. The cash will be there. We will be debt free at year end. So we will be distributing most of this money in our Q4 report in February. And then there is this residual amount of 34.2 million payable around April, which we will have to wait for paying out maybe in April, May. So with that, before handing over to Randi, I'm just going to give a bit more picture on the biggest asset we have now together with the cash is the BW shares. As you might recall, we agreed to deal with them on 15th August, selling off 12 VLDCs for 1 billion and 50 million, where we took 69% settlement in cash or innovation of theft. 31% settlement in BW shares. And where we had to negotiate with BW, what was the fair price of those BW shares. At that time, the stock price of BW was around $16.2. They, of course, had higher ideas, and we eventually agreed on a fair value of those stocks at $17.25 per share. You know, the assets of BW, the base case here, there are 15 dual fuel VGCs. These are regular VGCs upgraded close to $15 million by having dual fuel propulsion. We peg them at around $90 million. They have some eco, non-dual fuel ships. Three of those, we peg them at $80 million. One non-eco ship, we peg this at $65 million. And then the advanced fleet. 1 billion and 50 million, as mentioned, giving an average value of those ships at 88. Then they have 52% ownership share in BW India. We peg the value at 62. They recently sold the oldest ship, a 2007-built ship, at 65. So we do feel that value very much holding up. BW Confidence in India downstream investment, 30 million. They have a good TC book, chartered in some ships, also with options attached to buy some of these ships, which they recently illustrated by buying BV Kuzuka. 2009 built ship at $69.5 million, which is around $17 million lower than the market value. So certainly there is some value in the TC book, not only in chartering in ships at lower rates than you're chartering them out, but having these options attached. Last item is the product services, which they have done very well on. They have... net profit for this business unit just in Q3 of 60 million, bringing the year-to-date profit for this business unit as end of Q3 at $108 million. We kind of peg this value on $100 million, but we do expect them to make maybe $150 million on this business unit just in 2024. So meaning that you are getting it at less than one time price earnings. Then we need to adjust for the working capital. It has some working capital. Working capital really depends a bit on shipping. Are you doing voyage charter? You will have working capital. Are you doing time charter? You will have negative working capital. So it really depends a bit on your trading. When you're doing voyage charter instead of TC, you should usually be compensated by having to take that working capital. So we are valuing working capital, a dollar to a dollar, because you can easily liquidate it. by taking all your shifts on TC. Then they have to pay off the cash settlements, as I mentioned, 69% of the purchase price, including the debt innovation. They have very limited debt. They paid a dividend, pretty good dividend there, payable in September, which we deduct. And then we put in the consensus earnings for the second half of the year, because most of our shareholders, they will benefit from the earnings of BW. in the second half of the year as we will be collecting stocks where we can get dividends for Q3 and Q4. So when we're putting this together, we end up at an NAV of 2.6 billion. After we have received all our shares, there will be 151 million shares in the company where we own 19.3 million, giving us 12.8% shareholding. So that's how we compile this fair price of the stock of 17.25. So yesterday the stock price was $13.2, which means that, you know, let's call it all the working capital and debt and cash. We should keep that as is. I think the value on Odosa is fairly stable, which means that today you're getting that stock at 25% discount to gross asset value. So keep in mind the 25% discount on NAV. That's a pretty big number, but as we are actually talking about 25% discount on gross asset value, where you're not taking into account the leverage factor. So we think that that stock is attractively priced and we are happy to own it. Our intention is to distribute this share to our shareholders once the lockup is elapsed, which means that In general, for an advanced gas shareholder, you will get a quarter of a BW stock for every advanced gas share you have, which means that you will still keep some exposure to this market, and we think that we have done a good swap there, selling out of fleet, mostly spot-oriented, into BW with less leverage, and also more different business units, making that business a bit more diversified. With that, I hand it over to Randi. No, actually, I have one more slide here. We have a to-do list now. As I mentioned, we are planning to close down the company. A lot of people will ask us about the timeline, so we provided that timeline for you here. The dividend, as I mentioned, we declare $3.50 per share, payable December 23rd. During December, we will also be organizing the remaining deliveries to BW so that by year end all the ships should be delivered to BW. And then for every transaction there is a 40-day lock-up on each of the share settlements, which means we should have all the shares in BW free in early February. We then also intend to call a special general meeting with two objectives. One is to reduce the paid-in capital in order to make this tax-efficient for our shareholders, that they get return of the principal, meaning return of capital rather than return on capital, which, depending on jurisdiction, have lower tax, because the return of principal from all tax jurisdictions, that will be tax-free. Then we're also planning to wind up the company in order to reduce the cost, listing fees and auditors and such. We are working on closing the MGC sale, where the main item to be closed is the issuance of new refund guarantees to Exmo. And as mentioned initially, we will have a milestone payment scheduled for April for the profit element of 34.2 million. So we will be reporting Q4 in February, paying off the excess cash and the BW shares, working on the windup process. And then once we collect the remaining 34.2 million, hopefully around April, we will report Q1 in May, pay out this residual amount. And that's it. And that's the final voyage. And then our intention is to close the company as we have returned all the money back to where it belongs, which is with the shareholders. So with that, I hand it over to you, Randi.

Thank you, Einstein. Let's go to slide 11 for the key financial figures from the income statement. Well, the third quarter was a good quarter. We reported a TCE earnings of 46 million corresponding to a TCE per day of 41,900, which is actually above or about twice our cash break even. And despite being 5 million lower than previous quarter, we're actually 5 million ahead of the last year's results by looking at the year-to-date figures. In TCE numbers year-to-date, we reported $56,000 a day for 24. compared to $52,000 a day last year.

I'm not planning to pester you, but you said $5 million last year. We're at $10 million.