Euroseas Ltd. Q2 FY2023 Earnings Call

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas Conference Call on the Second Quarter 2023 Financial Results. We have with us Mr. Aristides Pittas, Chairman and Chief Executive Officer; and Mr. Tasos Aslidis, Chief Financial Officer of the Company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. I must advise you that this conference is being recorded today. Please be reminded that the Company announced their results with a press release that has been publicly distributed. Before passing the floor to Mr. Pittas, I would like to remind everyone that in today’s presentation and conference call, Euroseas will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements, which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to Slide number 2 of the webcast presentation, which has the full forward-looking statement, and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it. And now, I’d like to pass the floor to Mr. Pittas. Please go ahead, sir.

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the six-month period and quarter ended June 30, 2023. Let’s turn to Slide 3 of the presentation to go over our income statement highlights. We are very pleased with our results for the second quarter of 2023, which is one of the best results we have ever had since Euroseas became a containership focused public company in 2018. For the second quarter of 2023, we reported total net revenues of $47.7 million and a net income of $28.9 million, or $4.15 per diluted share. Adjusted net income was $29 million, or $4.17 per diluted share. Adjusted EBITDA for the quarter was $30.6 million. Please refer to the press release for the reconciliation between adjusted net loss and adjusted EBITDA. As part of the company's common stock dividend plan, our Board of Directors declared a quarterly dividend of $0.50 per common share for the second quarter of 2023, which will be payable on or about September 16 to the shareholders of record on September 9, 2023. The annualized dividend yield based on the current share price is above 9%. This is the sixth consecutive quarter of the company paying meaningful dividends. We remain committed to continue paying significant dividends to our shareholders. The original share repurchase program of $20 million approved by the Board in May 2022 has been extended for another year. As of August 9, we have repurchased 396,000 of our common stock in the open market, for a total of about $8.1 million. This represents close to 6% of our total shares. Tasos will go over the financial highlights in more detail later on in the presentation. I'm also pleased to announce our third annual sustainability report which covers our 2022 environmental, social, and governance progress in achieving our sustainability goal, our commitment to responsible business practices and associate footprint. In this year's report, we include our materiality metrics, which includes input from all our stakeholders. The report is based, as usual, on the Sustainability Accounting Standards Board (SASB) Standards, but additional criteria have been considered such as the Global Reporting Initiative (GRI) and the Nasdaq ESG reporting guidelines, plus the United Nations Sustainable Development. The ESG report is available under the corporate sustainability section of the company's website. Please turn to Slide four, where we discuss our recent acquisition, chartering, and operational developments. As previously announced on July 6, 2023, the company took delivery of its second new building vessel, the motor vessel Terataki, an eco 2,800 TEU feeder containership from the Hyundai Mipo Dockyard in South Korea. The vessel is EEDI Phase 3 compliant and equipped with the Tier III engine and other sustainability-linked features including the installation of alternative maritime power (AMP). The acquisition was financed with a combination of own funds, and the sustainability-linked loan provided by the National Bank of Greece. Following its delivery, motor vessel Terataki commenced the 36 to 40-month charter with Asyad Lines at a growth rate of $48,000 per day. Continuing on the charter front, the contract for the motor vessel Joanna was extended for a period of six to eight months at a daily rate of $13,900. We also reached a mutual agreement with them to terminate the current charters for the motor vessels Rena P and Emmanuel P while concurrently fixing the vessels for new charters for a period of 20 to 24 months at $21,000 per vessel per day. These new charters are expected to contribute $2 million to $4 million in extra revenues over the same period. During the second quarter of 2023, there were no dry docks or vessels off-hire. Please turn to Slide five, where you can see our current fleet profile. Euroseas' current fleet is comprised of 19 vessels under water, which includes 12 feeder containerships and seven intermediate container carriers with a total carrying capacity of about 59,000 TEU and an average age of just below 16 years. Turning to Slide six, we sold our vessels under construction, which currently consists of seven, they were nine up to very recently, our new eco feeder containerships. The seven newbuildings are expected to be delivered in 2024 and have a total carrying capacity of 16,000 TEU, four with a carrying capacity of 2,800 TEU each and three with a carrying capacity of 1,800 TEU each. After the delivery of the seven feeder containership newbuildings in 2024, Euroseas' fleet will consist of 26 vessels and a total carrying capacity exceeding 75,000 TEU. Let's now turn to slide seven for a graphic view of our vessels' employment schedule. As you may see, with a very small chart that covers throughout the next two years, about 93% of our fleet is fixed for 2023, and almost 64% for 2024. This very high charter coverage at quite profitable rates for the remainder of the year suggests that we should continue registering highly profitable quarters regardless of charter rate development. Let's now turn to Slide nine to review how the 6 to 12 months’ time charter rates have developed over the last 10 years. One-year time charter rates were up during the first half of the second quarter, with a decline again by about 15% compared to the highs in May and about 75% lower than the levels a year ago. However, they are still significantly higher than their pre-pandemic levels. As of August 4, the 6 to 12-month time charter rate for 2,500 TEU containership stood at $14,750 per day, which is higher than the 10-year median rate of $9,250 per day but lower than the 10-year average rate of around $18,000 per day. Comparatively, the rate for the 4,400 TEU containership stood at $2,000 per day, which is much higher than the 10-year median rate of $10,750 per day but still lower than the 10-year average rate of around $25,000. Moving on to Slide 10, we go over some further market highlights. During the second quarter of 2023, one-year time charter rates slightly improved, but sales have markedly decreased by about 15%. The average rates during the second quarter of 2023 were up by 19% compared to the previous quarter, as shown in the table. By and large, there was resilience in the market during the second quarter and even some upward momentum in the first half of the quarter. In view of this, the rates across the size sectors have experienced some support due to continued demand, in tandem with the short-term lack of charter vessel availability. Only lately, are we seeing further correction. The price index increased by about 1% quarter-on-quarter but has come down a bit since then, in line with the charter market decline. Second-hand prices remain high, nevertheless. The newbuilding price index increased by about 3% in the second quarter compared to the previous quarter. Newbuilding prices generally remained high amid cost inflation and extended yard forward cover. The idle containership fleet as of July 17 stood at about 1.1% of the fleet. The idle fleet peaked in February 2023 at $0.8 million TEU, which has been trending downward ever since. Recycling activity was higher during the second quarter, with 29 vessels accounting for 4,000 TEUs having been scrapped. The pollution remains fairly subdued amid some short-term improvements in freight and charter markets, which meant that some vessels circulated for recycling were instead sold for further trading. Recycling is anticipated to continue for the remainder of 2023 and 2024. Scrapping prices have also incrementally softened during the second quarter to about $560 per lightweight tonne, which is still about 40% above the 2019 average. Overall, the containership fleet has grown by approximately 4.2% year-to-date without accounting for idle vessels retrieving. Please turn to Slide 11. With this latest update in July 2023, the IMF's latest forecast is modestly higher than its previous conditions in April 2023. However, it is still weaker by historical standards. Global growth is projected to fall from an estimated 3.5% in 2022 to 3% in both 2023 and 2024 from previous predictions of 2.8% in 2023 to 3% in 2024. March slowdown in global activities is therefore anticipated in the second half of 2023 and the first half of 2024, with a look for gradual stabilization in the second half of 2024. Relative support is provided by rate cuts in many areas around the world, and the expectations of inflation continuing. China's reopening appears to be uneven and volatile, even stalled, some might say. A renewed softness in the housing market, growing concerns of local government financial risks, and an uncertain external environment for the export sector weigh on the economy's near-term growth plan. Time's growth forecast of 5.2% in 2023 and 4.5% in 2024 remains unchanged, while growth in other emerging and developing countries is projected to defy the overall global economic slowdown. There is strong demand from India, which delivers the biggest upside surprise so far this year, driven by strong government CapEx and services exports. Despite the general global slowdown, the U.S. economy is forecast to moderately grow by 1.8%, which compared to the previous IMF growth forecast of 1.6% seems to suggest that the U.S. can potentially avoid recession concerns in the second half of 2023. However, the IMF seems to have lowered its growth projections for the U.S. in 2024 to just 1% from its previous 1.1% growth forecast. On the other side of the world, literally, the Russian economy is faring better than expected, with a revised estimate of 1.5% growth for 2023, up from 0.7% in the previous quarter. The latest Glaxo estimates indicate that the container fleet will continue to experience subdued demand for the remainder of the year due to the challenging market conditions, with trade growth expected at just 1%. For 2024, demand is expected to return to a positive trade growth level of about 3.4%. Please turn to Slide 12, where you can see the total fleet age profile and container ship order book. The containership fleet is relatively young, with most vessels under 15 years old and only 10% of the fleet over 20 years old. The largest percentage of this lies within feeder vessels, suggesting high potential recycling for this type of ship. This is the size in which we mostly operate. The order book as a percentage of the total fleet stands at 28.3% as of August 2023. We expect new deliveries of about 9.4% of the current fleet to be delivered this year, 10.6% next year, and 6.4% in 2025, with the majority of the delivery scheduled to start from the second half of 2023 through the first half of 2025. Turning on to Slide 13, we also go over the fleet age profile and order book for ships in the 1,000 to 3,000 TEU range. As these sizes are the backbone of our operations, as the primary focus of our newbuilding program, the order book here stands at just 11% as of August 2023. According to Clarksons, new deliveries this year are estimated at 9.4%, 5.6% in 2024, and 1.2% in 2025. Additionally, 50% of the fleet is over 15 years old. Clearly, the dynamics are very favorable for this sector of the market, as we can expect a decline in the size of the fleet in the next few years. Let's move to slide 14 where we discuss our outlook summary for the containership market. Daily high rates for our sour investors have declined since last year's highs, following a pronounced correction in the second half of 2022. There are a number of signs that the previously sealed containership charter market is now being affected by the decreasing demand for whole freight. Additionally, there has been a noticeable accumulation of available tonnage in smaller feeder sizes, leading to a larger decline in charter rates for these vessels. Although the container freight index initially rebounded in April 2023, recently freight rates softened again and further declines are anticipated as record deliveries continue to be incorporated by the market participants. Presently, the index sits at a level that is 80% lower than its peak in January 2022, returning to the pre-COVID-19 10-year average. Data volumes fell by 2% year-on-year, but still remained about pre-pandemic levels. For the remainder of 2023, there are still considerable challenges ahead. General downward pressure is expected to emerge as supply growth accelerates and the increasing number of charter vessels will be delivered. On the other hand, our fleet growth could be somewhat mitigated by environmental regulations that will force some vessels to either reduce speed or stop trading. But it remains to be seen how economic developments will unfold, especially starting in 2024. This, we believe, will essentially determine future shipping volumes and overall demand, as well as the evolution of charter rates. The energy transition continues to gain traction and will play an important role in the evolution of the vessels of the future, but also the trading patterns within the industry. While it is evident that the shift is taking place, the long-term outlook is intricate and uncertain. The direction, speed, and metrics of the transition are yet to be fully determined. One thing, though, that is becoming obvious is that the spread between charter rates achieved by eco vessels over conventional ones is expected to further increase. Also, the smaller size vessels from 1,000 to 6,000 TEU are expected to recover faster from any downturn due to the healthy supply situation. As many overweight ships will likely be scrapped, the lower order book will mitigate any differences. Let's move to Slide 15. The left chart shows the evolution of one-year time charter rates for containers with a capacity of 2,500 TEU since 2010. One-year time charter rates are far below last year's peak but above historical levels. As previously mentioned, the current one-year time charter stands at $14,750 per day, which is much higher and profitable than historical median rates. At the same time, the right-hand chart shows the historical range for newbuilding and 10-year-old containerships with a capacity of 2,500 TEU. As charter rates across the container market have remained relatively buoyant in the past several months, values in the second-hand market have been equally resilient and stubbornly high. We believe that we are well protected against market volatility with high contracted revenue coverage throughout 2023 and 2024 at very healthy rates. Our liquidity buildup will allow us to comfortably take delivery of the remaining seven newbuilding vessels while keeping leverage low at around 60%. It will also allow us to continue paying significant dividends and executing on our stock repurchase program, as prices continue to hover at levels below 50% of NAV. At the same time, we will continue to evaluate investment opportunities with low risk that will incrementally increase our revenues and growth potential. And with that, I will pass the floor to our CFO Tasos Aslidis to go over our financial highlights in further detail.

Thank you very much. Good morning from me as well, ladies and gentlemen. Over the next four slides, I will give you an overview of our financial highlights for the second quarter and first half of 2023 and compare them to the same period of last year. With that, let's turn to Slide 17. For the second quarter of 2023, the company reported total net revenues of $47.7 million, representing a 9.6% decrease. Our total net revenues were $48.5 million during the second quarter of last year. This decrease was the result of the lower charter rates for our vessels in the second quarter of 2023 compared to the same period of last year, partly offset by the increase in the average number of vessels we owned and operated in the second quarter of this year. The company reported a net income for the period of $28.9 million compared to net income of $30.7 million for the same period of 2022. Other financial costs for the second quarter of 2023 amounted to $1.2 million, resulting from $2.4 million unrealized finance costs paid for our loans, partly offset by $1.2 million of imputed interest income as we financed the construction of our newbuildings before they were delivered. This compares to $1.1 million for the same period of last year when we did not include any net interest income. The interest paid for our loans is due to the amount of debt we have and the increase in the weighted average of LIBOR and SOFR rates we face in the current period compared to the same period of last year. Additionally, it should be noted that in the second quarter of 2023, total interest income came to about $265,000 compared to almost zero during the same period of 2022. Adjusted EBITDA for the second quarter of 2023 was $30.6 million compared to $34.2 million achieved in the same timeframe in 2022. Basic and diluted earnings per share for the second quarter were $4.17 and $4.15 respectively, calculated on about $6.9 million basic and above $7 million diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $4.26 and $4.24 for last year respectively. Excluding the effect on income of the unrealized loss and derivatives, the amortization of below-market time charters acquired, and the depreciation on the portion of the consideration of vessels acquired with below-market charters allocated to the below-market charters, the adjusted earnings for the second quarter of 2023 would have been $4.19 per share basic and $4.17 diluted compared to adjusted earnings of $4.10 and $4.08 basic and diluted respectively for the same quarter of last year, making similar adjustments. Usually, security analysts do not include the above items in their published estimates of earnings per share. Let’s now look at the numbers for the corresponding six-month periods ended June 30, 2023, compared to last year. For the first half of the year, the company reported total net revenues of $89.6 million, representing a 4.5% decrease from total net revenue of $93.9 million during the same period of 2022. The company reported a net income for the period of $57.6 million compared to a net income of $60.7 million for the first half of last year. Interest and other financial costs for the first half of 2023 amounted to $2.1 million, which is the result of $4.4 million of interest finance costs paid for our outstanding loans, along with $2.3 million of imputed interest income as we finance the construction of our newbuildings before they are delivered, compared to $2.1 million in interest financial costs paid during the same period of last year. Again this year, over the six-month period, we had interest income of about $500,000 compared to almost zero interest during the same period of last year. Adjusted EBITDA for the first half of 2023 was $56.6 million compared to $65.3 million achieved during the first half of last year. Basic and diluted earnings per share for the first half of 2023 were $8.28 and $8.25 respectively, calculated on about $7 million weighted average number of shares outstanding. That compares to basic and diluted earnings per share of $8.40 and $8.36 respectively, for the same period of last year. Making similar adjustments to our net income for the first half, as I discussed for the second quarter, the adjusted earnings per share for the six-month period ended June 30, 2023 would have been $7.29 and $7.26 basic and diluted respectively, compared projected earnings of $7.81 basic and $7.77 diluted for the same period of 2022. Let’s now move to Slide 18 to review our fleet performance. We will start our review by looking at our fleet utilization rates for the second quarter of 2023 and 2022. As usual, our fleet utilization rate is broken down into commercial and operational components. During the second quarter of 2023, our commercial utilization rate was 100%, while our operational utilization rate was 99.8% compared to 100% commercial and 99.7% operational for the second quarter of last year. On average, 17.95 vessels were owned and operated during the second quarter of this year at an average time charter of $30,153 per day compared to 16.6 vessels that we owned and operated in the second quarter of last year, and an average of $33,714 per vessel per day. On our vessel daily operating expenses, including management fees, averaged $7,114 per vessel per day for the second quarter of this year compared to $7,080 per vessel per day during the same period of 2022. G&A expenses amounted to $715 and $654 per day respectively for the two periods. Moving further down this page, we can see the cash flow breakeven rate for the second quarter of this year, which also takes into account dry dock expenses, interest costs, and loan repayments. Thus, for the second quarter of 2023, our cash flow breakeven rate was $2,837 per vessel per day compared to $13,562 per vessel per day during the second quarter of 2022. Finally, in the last line of the table, you can see the common dividend paid expressed in dollars per day per vessel. In the second quarter of 2023, we paid the equivalent of $2,217 per vessel per day in dividends compared to $2,414 for the same period of last year. Let us now go over the same figures for the six-month period of 2023 compared to the same period of last year. During the first half of 2023, our commercial utilization rate was 99.1% and our operational rate was 98.7% compared to 99.8% commercial and 99.6% operational for the same period of last year. On average, we owned and operated 17.52 vessels during the first half of this year, with an average time charter equivalent of $29,705 per day, while for the same period of 2022, the company owned and operated 16.23 vessels, achieving an average of $33,843 per day. Our vessel operating expenses, including management fees, were $7,215 per vessel per day in the first half of this year compared to $6,867 per vessel per day for the same period of last year. G&A expenses for the two periods amounted to $7,027 and $6,067 respectively. Again, looking at the bottom of this table, we can see the cash flow breakeven rate for the first half of 2023. That averaged $13,993 per vessel per day in the first half of this year, which compares to $13,805 per vessel per day for the same period of last year. The final line, we saw the dividend base expressed in dollars per day during the first half of this year, that amount was $2,194 per vessel per day, which compares to $1,207 from last year, the difference being due to the fact that we started paying dividends in the second quarter of last year. Let’s move on and go to Slide 19 to review our debt profile and our forward cash flow breakeven levels. Our total debt as of June 30, 2023, stood at about $132.8 million. On the top of the slide, you can see a snapshot of our current debt repayment profile over the last several years. We have already made $27.5 million of loan repayments in 2023. In the remaining part of the year, we have to make another $14.8 million of loan repayments as well as we are due to pay by loans amounting to $27 million. The latter we are in the process of refinance. For 2024 and 2025, our loan repayments drop to about $31 million and $35 million respectively, including balloon payments, which we should be able to refinance if we choose to do so. The average margin of our current loans stands at about 2.54%, and assuming a soft rate of about $5 and 36%, our cost of our senior debt amounts to about 7.9%. This figure would drop to 7.6% if we accounted for the portion of our debt for which the underlying rate has been kept. I should say that we plan to partly finance our remaining newbuildings with debt, and in 2024, I would expect us to raise an additional approximately $165 million of debt to cover about 60% of the price of the newbuilding investments. I would like to draw your attention to the bottom of the slide now, where we present the level and components of our expected cash breakeven level for the next 12 months. We expect to have an EBITDA breakeven level of about $8,851 per vessel per day and a total cash flow breakeven level of about $14,682 per vessel per day. Let's sum up our presentation by moving to Slide 20 to present some highlights from our balance as of June 30, 2023. Our assets included cash and other current assets amounting to about $51.2 million. Our assets also included advances that we paid for our newbuilding programs, totaling about $93.8 million. Finally, that includes the book value of our vessels, which was $224.3 million, resulting in a total book value of our assets around $394.1 million. On the liability side, our debt as of June 30, 2023, as we already mentioned, stands at $232.8 million, representing about 33.7% of the book value of our assets. The fair value of our below-market charters acquired is about $27.3 million, accounting for another 7% of our assets and other liabilities of about $10 million account for another 25% of the total book value of our assets. However, it should be noted here that the charter-adjusted market value of our fleet is much higher than its book value. Based on our analysis and using market transactions, we estimate the charter-adjusted value of our fleet and newbuilding contracts to be approximately $369.6 million, which translates to a net asset value for our company of about $372 million or about $53 per share. Recently, our shares have been trading around $21 per share, thus having a significant gap between net asset value and market price representing good appreciation potential for our shareholders and investors. With that, I would like to turn the floor back to Aristides to continue the call.

Thank you, Tasos. Let me open up the floor for any questions we may have.

Thank you. We'll now be conducting a question-and-answer session. Thank you. Our first question is from Tate Sullivan with Maxim Group. Please proceed with your question.

Good day, how are you?

Hi, Tate.

Hello. On Slide 13, you showed a little more than 9% fleet growth this year for TEU vessels less than 3,000. Is that indicating what you show year-to-date that roughly half of the vessels have entered, what so far this year, with another half and the other approximate numbers of the new ships entering the fleet this year?

Yes, half of the vessels that were supposed to be delivered—less than half of the vessels that were supposed to enter the fleet this year have actually entered already, yes.

Then what have you observed in terms of chartering activity for those newbuilds entering the market in terms of securing contracts and the length of time securing contracts that had delivery?

There were quite a few ships that were quite large that had already secured employment, even smaller ships had already secured employment. For example, our Terataki that was delivered in July. We secured employment for it since last year, and it was obviously at very high rates. A similar vessel that opened up that was delivered to somebody else and was not chartered was able to be fixed at around $25,000 per day for the year. So the ships that are being delivered are being fixed today but slightly lower rates than what was achievable last year.

I think for the previous announcement, you announced that July 25 were the new contracts for the Rena P and the Emmanuel P. And I think you mentioned that was with ZIM. Can you mention a part of how the negotiations went for that? I mean when I first went the headline, I was expecting lower contracts for yourself, but you did extend on for longer terms at higher rates than the previous contract. So can you give more of the situation behind those contract negotiations if you can?

Sure. I have to be very clear to you so that we don't give any wrong impression. We have no obligation to cancel the charters that we had with ZIM. And there was no such request. We were told that if we wanted the vessels free, we could take them and charter them elsewhere. We looked in the market, and we saw that we can get something a little bit better than what—and for longer than what we had in our ZIM charters. And very amicably, we agreed with ZIM that we would cancel the charter with them, and we would fix with OCL at what we did. Everything was done very amicably and without any distress.

Great. Do you think that kind of example will occur in the containership market for the rest of the year? I mean, is there still counterparty risk with longer-term contracts? And how do you manage that still?

I think that the main counterparties are all credible operators of ships. They will stick to the charters and perform. I don't expect us to see non-performances. Everything that will be done if there is some rearrangement because some lines want to reduce—some others want to increase the number of ships on the charter. Everything will be done amicably, commercially, and without dispute.

Okay, great example on the contract with OCL. Thank you.

Thank you very much, Tate.

Next question is from the line of Kristoffer Skeie with Arctic Securities. Please proceed with your question.

Hello. How are you?

Hi, Kristoffer.

Congrats on a great quarter. I was just following if you can share some details on how you are progressing on the seven new builds, both in terms of employment but also on the financing side, I mean, how much is now remaining CapEx? And how much do you expect to fund through senior debt?

On the employment side, we haven't raised anything yet. We are in contact with various charters. But I think it's too early to fix the ships yet. So we will see closer to the delivery date how we fix them. On the financial side, Tasos can brief a little bit more. We have a range or pretty close to a range in the financing of the first ship that we—yet on the first ship that will be delivered in 2024. We are in discussions with other financers regarding the rest, and I feel very comfortable about it. But Tasos, your figures please.

We had about $280 million of vessel payments to make. The value of the vessels that were to deliver is about $290 million, and we have made about $60 million of advanced payments against that through equity. We forecast that the equity will already be built into our numbers so that we will be able to cover this with our cash flow generation. As I mentioned earlier, we expect to assume incremental debt of around $165 million, give or take, to finance the vessels. So $165 million in debt, about $60 million remain, and we're going to put another $40 million of equity to cover the payments.

That's around $165 million and then remaining $40 million through cash on hand? Okay, great. And with that, I mean, it's quite a comfortable cash level and you will definitely build a lot of cash over the coming quarters. You mentioned in your presentation and results that you are building a significant war chest in order to pursue investment opportunities. So I was just wondering, can you elaborate a bit on that? And are you starting to see any opportunities out there in the market on secondhand transactions that might be interesting?

Sure. As I said in the presentation, our cash flow buildup is sufficient to easily finance the new building program that we have. It is sufficient for us to continue paying dividends in the foreseeable future that are significant, close to the 10% yield, and of course, to continue acting on our stock repurchase plan. But in addition to all that, the liquidity we are building, and we currently have, I think about $50 million is sufficient to also look at potential new acquisitions. At this stage, we would not buy something speculatively. We would only invest if we can find a deal that is backed by a charter that will bring the residual value of the vessel at the end of the charter at extremely low levels. So that is the strategy, and we feel comfortable about its implementation.

Great, thank you. That's it for me.

Thanks, Kris. Thank you.

Our next question is from the line of Climent Molins with Vale Investor's Edge. Please proceed with your question.

Good morning. Thank you for taking my questions. I wanted to start by asking about the ADN Express. Could you provide an update on how the arbitration against the previous charter is going?

Yeah. As we said in our previous call, we have assumed that we will recover nothing from that arbitration. Unfortunately, it seems that we are moving along that line right now. The charter has disappeared. We think he has—he is winding down the business. We can't find him, and we can't locate the assets, but we continue trying to do that. Hopefully, we will find something. But as we said, our projections suggest that this will be a loss that we have incurred already. So if there is any surprise, it can only be a positive one because we've planned for the worst.

You've pursued a very balanced approach to capital allocation by ordering new builds, distributing dividends, and repurchasing shares. Despite that, the market is still valuing the company at a significant discount to NAV. So share repurchases continue to make a lot of sense. Are tender offers something the board has or would consider? Or do you prefer to stick with share repurchase in the open market?

I think that purchasing in the open market is the way that we want to continue. Tender offers usually have to be made at a higher price. We believe that by implementing gradually the strategy with the stock repurchases, we are doing it more economically.

Makes sense. That's all for me. Thank you for taking my questions. And congratulations on the quarter.

Thank you very much.

Thank you. At this time, we have reached the end of our question-and-answer session. I'll turn the call over to Aristides Pittas for closing remarks.

Thank you all for participating in this call. We will be back with you in three months' time, hopefully, with good results again. Thanks everybody.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.