TBS International Limited

TBS International recently reported the best quarter in the company's history, and its second straight record quarter, as the shipping sector booms. Revenues soared 104.6% year-over-year.

The company has surprised on earnings five consecutive quarters. TBS International has attractive value fundamentals with a forward P/E of only 4.76.

Company Description

TBS International Limited (TBSI - Snapshot Report) is an ocean transportation company that ships cargo worldwide on 44 vessels.

The company ships through liner, parcel, bulk and vessel chartering services on key trade routes between Latin America and China, Japan and South Korea and ports in North America, Africa, the Caribbean and the Mediterranean.

TBSI, a Zacks #1 Rank (Strong Buy), has developed a niche in multipurpose tweendeckers and smaller dry bulk carriers varying from 17,300 dwt to 45,500 dwt that can service ports that larger ships cannot. The company ships steel products, metals, fertilizer, coal, salt, sugar, grain, chemicals and other industrial goods.

TBS International is heavily concentrated in Latin America and offers a high-frequency of sailings from Chile, Ecuador and Peru to China, Japan and South Korea. The Latin America route serves industrial cargo customers in Brazil, Argentina and Venezuela with scheduled transports to the Caribbean, and the various coasts of Central and South America.

The company operates time charter services, which includes both short- and long-term time charters.

TBS International Reports the Best Quarter in the Company's History

On Aug 6, TBS International reported record second quarter earnings as charter rates and volumes soared. Net income rose 142.4% to $52.6 million, or $1.82 per share, compared to $21.7 million, or 77 cents per share in the second quarter of 2007. Consensus estimates called for $1.63 per share.

Revenues jumped 104.6% to $156.9 million from $76.7 million in the year ago period. Voyage revenues totaled $128.7 million, up 113.1% from $60.4 million in 2007.

Cargo volume increased 52.7% and freight rates rose 37.6%, or $25.06 to $91.79 per ton compared to $66.73 per ton in the 2007 period.

Average daily voyage time charter equivalent, which is industry standard after deducting all voyage expenses from revenues, surged 52% to $31,212 per day from $20,538 per day in 2007. TBSI also saw the average daily voyage time charter rise 10.3% in the quarter compared to the first quarter of 2008.

Time charter revenue also jumped compared to 2007. Revenues rose 57.1% to $25.3 million from $9.2 million in 2007.

Average Daily Time Charter Equivalent, the industry standard that reflects time charter-out revenues reduced by commissions, rose 63.2% to $30,563 per day from $18,727 in the second quarter of 2007. The company said the increase was due to the upward trend in the worldwide shipping spot market rates.

TBSI operated 39 vessels in the second quarter of 2008 compared to 31 vessels in the same period a year ago.

TBSI Is Bullish on Its Business

To meet customer demand, TSB International took delivery of 8 vessels in the first six months of 2008 and have 2 additional vessels which will be delivered within 30 days. All together, the company will be operating 46 vessels in the second half of 2008: 23 multipurpose tweendeckers and 23 handymax and handysize bulk carriers.

TBSI intends to target non-containerized project cargoes in the mining, energy, steel production and infrastructure and construction sectors as growth areas that will benefit from expanding global trade.

Entering into the second half of 2008, the company sees strong cargo requirements and firm freight rates.

Consensus Estimates Rising for the Full Year

Covering analysts were raising full year estimates going into the reporting of the company's second quarter results. In the last week, consensus estimates for the year rose 41 cents to $6.78 from $6.37 per share as 1 out of 2 covering analysts raised estimates. 90 days ago, estimates called for $5.02 per share.

Value Fundamentals

TBS International is cheap. It trades at only 4.76x forward earnings. Its price-to-book is 2.55. The company has an outstanding one year return on equity (ROE) of 40.81%.