Castor Maritime In. (NASDAQ: CTRM) is climbing in the market early on this morning, trading on gains of more than 35% thus far. The gains come after the company announced the delivery of a new vessel as well as a new time charter contract. Here’s the scoop:
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CTRM Stock Rallies On Delivery And Time Charter Deal
Castor Maritime issued a press release early this morning. Interestingly, it seems as though Yahoo! Finance is delayed in feeding the release to the public. Nonetheless, the news proved to be overwhelmingly positive.
In the release, the company announced that through an agreement dated July 25, 2019 signed by a wholly-owned subsidiary, the acquisition of its second vessel has been completed. CTRM said that the vessel, the Magic Sun, is a 2001 Korean built Panamax dry bulk carrier. The vessel purchase came with a cost of $6.7 million.
In the release, the company said that it financed the purchase with cash on hand and proceeds from a $5 million unsecured term loan agreement entered into between the company and an entity controlled by its chairman, CEO and CFO, Petros Panagiotidis.
The loan was provided at a rate of 6% fixed interest. A bullet repayment will take place at maturity, which is 18 months from the drawdown date.
Importantly, CTRM said that its subsidiary entered into a new time charter agreement on August 30, 2019. The agreement, signed with Oldendorff Carriers GMBH & Co will generate daily revenue in the amount of $12,000 through the time charter of the newly acquired vessel.
In the release, the company said that the term of the agreement will range between 8 and 12 months. The time charter is epected to begin on September 7.
Perhaps most interesting, the company said that with the new employment of this vessel, it is expecting for revenue to increase by $2.9 million for the minimum scheduled period. Should the maximum period be used, the agreement will generate $4.4 million in revenue growth, covering more than 2/3 the cost of the vessel.
In a statement, Petros Pangiotidis, had the following to offer:
We are pleased to announce the delivery of our second vessel. Consistent with our growth-oriented strategy, in a short period of time, we have doubled the size of our fleet with the target of increasing annual cash flows and shareholder value.
This Is Big News
There are multiple reasons that today’s news is exciting. In my view, the most important are:
- Castor Maritime now has a new owned vessel. The larger the company’s fleet becomes, the more revenue that can be generated. With this new vessel, we can expect to see substantial revenue growth ahead.
- Moreover, the contract announced today solidifies at least nearly $3 million in revenue growth and could result in more than $4.4 million in revenue over the next 12 months. Considering the market cap held by the company of around $10 million, that’s a big deal!
- The agreement shows how quickly this newly-acquired vessel can pay for itself and turn profitable.
- Moreover, the investment made by the CEO at CTRM in order to purchase the vessel is an unsecured loan at only 6% interest. That’s a great rate. The loan also shows that the CEO of the company has confidence in his ability to lead the company to growth. After all, he’s got at least $5 million of his own money tied up in the company, not including his equity ownership. Sure, the $5 million will generate him a small profit, but he wouldn’t be making the move if there was any insinuation that the loan would not be repaid. This speaks volumes.
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