GEO Investing

In our May 29, 2015 e-mail to premium members, we stated we would perform more due diligence on the potential impact the Greek turmoil would have on Aegean Marine Petroleum (NYSE:ANW), operating as a marine fuel logistics company that markets and supplies refined marine fuel and lubricants to vessels in port, at sea, and on rivers worldwide.  Aegen’s headquarters are in Athens and the company serves customers across the globe, including in Greece.  After speaking with the company, we found management to be unconcerned about Greece.

GeoInvesting Speaks with Agean Marine Managment

We were able to speak with the ANW management about operational impacts if Greece exits the Euro, foreign exchange and corporate taxes:[hide]

  • If Greece exits the Euro and moves back to the Drachma, there would very little operational impact.  The company’s HQ is in Greece and employees who live there would be impacted, but operations would be little impacted.
  • Foreign exchange:
    • Most revenues are billed in USD.
    • There is credit risk if local currencies of customers are adversely impacted by FX and have to convert to USD to pay ANW.
    • Material fluctuations between the USD and Euro drive FX gains and losses.  Experienced a sizable FX loss in 2014 driven by decline in Euro. Q1 2015 FX flat.  Going forward, if Euro resumes decline to parity with the USD or less, ANW will have material FX exposure as they have businesses located in the Eurozone.
    • Per Form 20-F:  “Generally, in all of our service centers, we invoice our customers for the sale and delivery of marine petroleum products in U.S. dollars. Many of our customers are foreign customers and may be required to obtain U.S. dollars to pay for our products and services. A rapid depreciation or devaluation in a currency affecting our customers could have an adverse effect on our customers’ operations and their ability to convert local currency to U.S. dollars to make required payments to us. This would in turn result in credit losses for us, which would reduce our results of operations and cash flows.”
  • Corporate taxes:
    • ANW is a Marshall Islands Company and don’t pay income taxes.  So little risk if Greece has radical changes in tax rates and actually begin to collect taxes.

With recent analyst price targets as high as $18.00 and what we consider to be a fair value price target of $16.95 based on applying a P/E multiple of 15 on 2015 EPS of $1.13, we feel shares should reach $16 to $17 in the near term.   The bigger risk to ANW is foreign exchange risk with Euro, however most analysts feel like the risk of a further collapse between USD and the Euro is an unlikely scenario from current levels.  [/hide]

To see the key takeaways from our conversation with Aegean Marine Petroleum, as well as what we think shares of ANW are worth, please go here.

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