NORDIC AMERICAN TANKERS

By Nicolai Heidenreich

The first of Hamish Norton of Lazard Freres and Peter Swift of Seascope’s structured tanker companies, Nordic American Tankers (NASDAQ: NAT) is basking in the glory of the record earnings achieved by their triplet of suezmax tankers. Things are so good, in fact, that as we go to press NAT CEO Herbjorn Hansson is on a roadshow throughout the United States meeting his investors. There’s a lot for NAT to be happy about. The stock currently has a dividend yield of about 15% and the share price has rocketed from a 52 week low of $9 7/8 to above $22.50. Driving the move in the share price is the fact that suexmax rates have surged from $25,000 to $45,000 per day following the developments in the tanker market as a whole.

So the future looks bright for NAT investors, right? Maybe not. In this article we will give you a quick introduction to the company’s structure, explain the translation between market rates and dividends and, using a handy discounted cash flow valuation model and explain why at current levels we feel the share has reached its peak and will fall faster than most shipping shares when the markets turn the other way

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