– Danaos Corporation is an incredibly cheap charterer of container vessels to liner companies.
– It will earn its current market cap in cash over the next two years.
– CEO owns 39% of the stock.
– By end-2025 an undemanding 5.9x ex. cash P/E exit multiple on normalized earnings should yield a total return of 2.5x.
– Reasonable confidence in the outcome since 2/3rds of the revenue is already contracted to 2025 at the peak pandemic rates.
– Average contract length for DAC’s 69 vessels is 25 months.
– This is a cyclical and low ROIC industry, however, there is tremendous value to be generated in the next few years from the current contracts that will produce large amounts of cash for $DAC.
– Over the next 3 years Danaos will build up $1bn+ of incremental cash.
– Coupling this with an 8x EV/EBIT multiple on 2026 earnings and $12/share cummulative dividends during the priod results in $151/share target.
Exp. gain: +150% to $151/share
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