SA: Danaos – are stock buybacks finally coming?

SEEKING ALPHA‘s Romil Patel writes:

– Danaos had a great Q1 and the current valuation is the cheapest in the containership lessor industry.

– There are big backlogs for the next two years, which will provide a shield against lower freight rates.

– Share repurchases finally seem to be on the horizon.

Introduction

I believe that Danaos is significantly undervalued by the market likely due to fears of a global recession. I find the risk of a significant global downturn to have little impact on Danaos (NYSE:DAC) as it has already locked in revenue for the next two years and I think the stock has already priced in a downturn with this cheap valuation. I also think that pretty soon the wait for stock buybacks will be over.

Why I Like Danaos

What I like about this business model is its predictability. Unlike the business model of a shipping company like ZIM, Danaos only leases out containerships and does so over long periods of time. This makes for contracts that are locked in for many years in advance providing predictability in revenue, and margins are very wide (50%+ net margins). This kind of business model allows for continued profitability due to a predictable top line and low expenses….

The full post is here.