Scurrying Aboard A Tanker Companyby
Weak demand for tankers and the rising cost of insurance and ship maintenance have crimped earnings of bulk shippers. No wonder the stock of OMI, which operates 43 U.S. and international-flag bulk vessels, has sunk to 6 a share from nearly 12 last year. Earnings are expected to drop to 60 this year from 92 last year. Next year won't be as bad, but earnings are still expected to be lower than 1991's net.
Yet several big fund managers are snapping up OMI shares. Here's why: One investor believes that OMI's current slump presents "a classic case of buying opportunity in the stock," which he believes is worth 13 to 15 a share, based in part on the company's liquidation value. Analyst Jim Dowling of Furman Selz, a New York securities firm, says OMI has undergone "a dramatic transformation." He notes that under CEO Jack Goldstein's stewardship, OMI has markedly improved its balance sheet, significantly expanded its fleet, including tankers, and signed new joint ventures with reputable foreign and U.S. shippers. Through such ventures and direct ownership, OMI controls 22 international vessels.
OMI plans to split the company into separate domestic and international companies and then sell either 51% of the foreign company to another company or sell a part of it to the public. One investor, who expects the split to occur this year, believes such a move will boost OMI's stock.