Taylor Maritim Regulatory News (TMI)

27 January 2023

Taylor Maritime Investments Limited (the "Company")

Quarterly NAV Announcement, Trading Update and Publication of Factsheet

Grindrod Shipping offer closed with controlling stake secured

Deleveraging underway with the Company completing a vessel sale and agreeing two more

Outperformance of market indices from balanced chartering with firmer outlook

· Level of ownership of Grindrod Shipping now 83.23%

· Good momentum with deleveraging, with completed and agreed vessel sales achieving attractive IRRs and MOICs

· Debt to gross assets ratio expected to reduce to around 25% in the next two quarters

· Firm charter rates and cash yields of c.22%[1] despite muted Chinese economic performance

· Potential for market improvement underpinned by China outlook, tight supply and IMO regulations

· Interim dividend of 2 cents per share declared with 4x dividend cover

Taylor Maritime Investments Limited, the specialist dry bulk shipping company, today announces that as at 31 December 2022 its unaudited NAV was $1.67 per ordinary share compared to $1.70 per ordinary share as at 30 September 2022. The Company is also pleased to declare an interim dividend in respect of the period to 31 December 2022 of 2 cents per Ordinary Share.  The third quarterly factsheet of the current financial year is also now available on the Company's website, www.taylormaritimeinvestments.com.

Key Highlights (to 31 December 2022)

Grindrod Shipping Investment Update: 

· On 19 December, the Company closed its voluntary cash offer for Grindrod Shipping taking TMI ownership of Grindrod to 83.23%

· As part of the tender offer, TMI received a $24.6 million special interim dividend from Grindrod, representing a yield of 28% on its initial investment

· Grindrod is held as an investment at fair value through profit and loss contributing $352 million to TMI's NAV of $552 million based on the Fair Market Value of the Grindrod fleet

· The combined fleet comprised 57 vessels at quarter end, including six charter-in vessels (four of which have purchase options), two Company vessels contracted for sale and one Grindrod vessel contracted for sale. The combined fleet Market Value was $1.0 billion (excluding charter-in vessels without purchase options)

· During the quarter, Grindrod agreed the sale of a 2015 built 60k dwt Ultramax vessel in line with its carrying value. The sale is expected to complete in Q4 of TMI's current financial year and proceeds will be applied to repay Grindrod debt as required

· Since the tender offer closed, the Company and Grindrod have been making good progress in jointly evaluating next steps to capitalise on available synergies from the combined fleet across insurance, commercial management, technical management and corporate activities

TMI Portfolio Investment Update:

· At quarter end, TMI's fleet comprised 26 vessels (including two vessels contracted for sale). The Market Value of the TMI vessel portfolio at the quarter end was down 6% on a like-for-like basis

· During the quarter, TMI completed a vessel sale for net proceeds of $20.1 million (announced 9 December) generating an IRR of 25% and MOIC of 1.3x. TMI agreed a further two vessel sales expected to complete by 31 March 2023, one 2010 built 33k dwt Handysize vessel and one 2012 built 28k dwt Handysize vessel, for aggregate net proceeds of $24.4 million generating IRRs of 35% and 68% and MOIC of 1.56x and 1.54x respectively

· Net time charter equivalent rates averaged c.$15,830 during the quarter, contributing to an operating profit of c.$29.5 million and covering the interim dividend four times

· At quarter end, TMI's average net time charter rate was $15,800 per day, with an average duration of six months and an average annualized unlevered gross cash yield of c.22%[2]

· The Company's average net time charter rate compared favourably to the adjusted BHSI (Baltic Handysize Index) Time Charter Average (net)[3] which stood at $9,983 at quarter end, as the Company's chartering strategy mitigated the impact of market fluctuations and volatility relating to weaker-than-expected demand from China and drought in the Mississippi River Basin in the first half of the period

· The Company has secured an average net time charter rate of $17,161 per day for 62% of remaining fleet days for the Financial Year ending 31 March 2023 and an average rate of $17,384 per day for 20% of fleet days for the Financial Year ending 31 March 2024

· In addition, TMI contracted a 40k dwt Handysize newbuild in Japan delivering in Q1 of calendar year 2024 - a rare early delivery window given Japanese newbuild contracts are now only deliverable in 2H 2025. This is part of a limited renewal strategy and is in conjunction with disposals of older vessels; as an ammonia-ready, eco-design, from a top tier Japanese yard, the vessel will serve to lower the fleet's overall average age and enhance its ESG credentials

Commenting on the trading update, Edward Buttery, Chief Executive Officer, said:

"We're pleased that we secured a controlling stake in Grindrod which presents a transformational opportunity for TMI. The combined fleet allows both companies to achieve enhanced scale and synergies, increasing TMI's exposure to the geared dry bulk segment which continues to demonstrate favourable long-term fundamentals. The secondary market is active and we've realised solid returns with three sales agreed across the combined fleet and having completed one previously announced sale in line with our commitment to deleverage our balance sheet."

Dry bulk market outlook

Macro-economic headwinds, slower than expected recovery in China and continued easing of port congestion through the quarter kept the charter market subdued across all dry bulk segments relative to the outstanding 'post-Covid' earnings environment of 2021 which carried into the first half of 2022. Sentiment improved as China started to relax zero-Covid policies and signalled its intention to stimulate the economy with measures targeting the property and construction sectors (drivers of dry bulk demand).

Chinese New Year fell two weeks earlier than on average over the last 15 years, contributing to especially soft rates for January. In a 'normal' year, the market can be expected to improve by early March - it could be earlier in 2023 depending on how China adjusts to its new Covid policy. There is also reason for cautious optimism if China reverts to a pro-growth strategy.

Further support for charter rates is expected from increased grain exports in 2023 with diverted trades from the Black Sea generating an increase in tonne-miles while Brazil's soybean season is forecast at a record high by the International Grains Council. Combined minor bulk and grain demand (key drivers for the geared dry bulk segment) is forecast by Clarksons to grow at 1.4% in 2023 and 3.0% in 2024 while the Handysize fleet contracts by -0.5% in 2023 and -2.0% in 2024, representing a compelling 5.0% supply-demand spread.

Following the charter market, 10 year old 32k dwt asset values decreased from $18.0 million at 30 September 2022 to $16.0 million at quarter end. They have since risen to $16.5 million. We continue to anticipate support for earnings and second-hand asset values given ongoing supply side constraints and with recently-introduced IMO emissions targets expected to gradually lower operating speeds, reducing effective supply and catalysing scrapping of older, less efficient tonnage. Overall, we maintain a positive outlook through to the end of 2024 and possibly into 2025 as the orderbook remains near historical lows, shipyards are full and demand growth looks set to improve.

Financing

At the quarter end, the RCF and Acquisition Facility (in relation to the Grindrod transaction) were $140 million and $119 million drawn respectively, representing a debt to gross assets ratio of 31.2% which the Company expects to reduce to around 25% over the coming two quarters through agreed and planned vessel sales and operating cashflow in line with the commitment made in the Company's investment policy.

Taking into account $227 million of debt outstanding at Grindrod at the quarter end, the Company's 'look through' debt to gross assets ratio was 41.8% which is expected to reduce to around 36% over the coming two quarters[4]. The Company plans to continue to reduce debt from future vessel sales and operating cashflow in line with its commitment to de-lever its balance sheet.

Board Changes

Following the announcement on 5 January, the recruitment process for a new Chairman is underway.

ESG

TMI has cooperated closely with its commercial and technical managers to ready its fleet for new industry decarbonisation regulations coming into force from January 2023, designed to meet the IMO's 2030 GHG reduction targets. During the period, a further two vessels were fitted with energy saving devices including boss-cap fins, high performance paints, pre-swirl ducts and fuel efficiency monitoring systems. TMI recently contributed to various local initiatives in Guernsey, providing support to emergency services and organisations working to improve local welfare. TMI aims to achieve a long-term target of running a zero-emission fleet by 2050 and is a signatory to the Getting to Zero Coalition's "Call to Action for Shipping Decarbonisation".

ENDS

Notes to Editors

About the Company 

Taylor Maritime Investments Limited is an internally managed investment company listed on the Premium Segment of the Official List, its shares trading on the Main Market of the London Stock Exchange since May 2021. The Company specializes in the acquisition and chartering of vessels in the Handysize and Supramax bulk carrier segments of the global shipping sector. The Company invests in a diversified portfolio of vessels which are primarily second-hand. TMI's fleet portfolio numbers 26 vessels in the geared dry bulk segment. The ships are employed utilising a variety of employment/charter strategies.

On 20 December, the Company announced it acquired a controlling majority interest in Grindrod Shipping Holdings Ltd ("Grindrod") (NASDAQ:GRIN, JSE:GSH), a Singapore incorporated, dual listed company on NASDAQ and the Johannesburg Stock Exchange. Grindrod owns 25 geared dry bulk vessels complementary to the Company's fleet. They are mostly Japanese built, including 15 Handysize vessels and 10 Supramax and Ultramax vessels. Grindrod has six vessels in its chartered in fleet with purchase options on four. 

The combined TMI and Grindrod fleet numbers 57 vessels (including chartered in vessels).

The Company's target dividend policy is 8 cents p.a. paid on a quarterly basis, with a targeted total NAV return of 10-12% per annum over the medium to long-term.

The Company has the benefit of an experienced Executive Team led by Edward Buttery and who previously worked closely together at the Commercial Manager, Taylor Maritime. Established in 2014, Taylor Maritime is a privately owned ship-owning and management business with a seasoned team that includes the founders of dry bulk shipping company Pacific Basin Shipping (listed in Hong Kong 2343.HK) and gas shipping company BW Epic Kosan (formerly Epic Shipping) (listed in Oslo BWEK:NO). Taylor Maritime's team of industry professionals are based in Hong Kong, Singapore and London.

For more information, please visit www.taylormaritimeinvestments.com.

About Geared Vessels

Geared vessels are characterised by their own loading equipment. The Handysize and Supra/Ultramax market segments are particularly attractive, given the flexibility, versatility and port accessibility of these vessels which carry necessity goods - principally food and products related to infrastructure building - ensuring broad diversification of fleet activity and stability of earnings through the cycle.

IMPORTANT NOTICE

The information in this announcement may include forward-looking statements, which are based on the current expectations and projections about future events and in certain cases can be identified by the use of terms such as "may", "will", "should", "expect", "anticipate", "project", "estimate", "intend", "continue", "target", "believe" (or the negatives thereon) or other variations thereon or comparable terminology. These forward-looking statements are subject to risks, uncertainties and assumptions about the Company, including, among other things, the development of its business, trends in its operating industry, and future capital expenditures and acquisitions. In light of these risks, uncertainties and assumptions, the events in the forward-looking statements may not occur.

References to target dividend yields and returns are targets only and not profit forecasts and there can be no assurance that these will be achieved.