El podcast de J. Mintzmeir. Lo copio aquí porque en unos días dejará de estar disponible en abierto
Mark Kremin: Thank you, J. And just as a couple of remarks, great to be here with you in New York City in person. We've known you for years now and you're a bold contrarian with some -- better for worse for us, but appreciate the time. So thank you very much.
JM: Thanks, Mark. Appreciate it. Yeah, so we just saw the Q3 results that came out and you know, it's all time record highs for TGP in terms of net income and the DCF per share. Of course, last time we had these all-time highs, the shares were much higher, I think they were in the 40s range or something like that. And now we're down in the 16s. So there's a little bit of a split there. But before we kind of attack that and hopefully closing that valuation gap, let's just talk big picture about the LNG market.
I know we've had a lot of investor interest in that. We've seen a lot of rough stocks this year. You put out a slide showing the TGP has outperformed peers to-date. So just kind of a big picture view of how do you feel about the current market and over the next couple of years?
MK: Okay, this is Mark again, and I'll take this one on the market. I guess in the near-term, we see a good -- we share the view that through next year should be pretty good. I think we've actually done better, however, than the spot market, in the sense that we fixed out, not that we have a lot of spot exposure. We did fix out all of our spot ships until the May of 2020 earliest. And we did those a little over $80,000 on average, which when you take full utilization, which is what we've had, I think is going to stand up well to what's available today on term charters, or even spot rates over this period of time. And one of these charters goes into three years. So let's talk a little bit about what happens after 2020.
From a macro sense, we're not as excited about 2021, we're not as excited about 2022, where I wouldn't say -- I'll say pleased not to have spec ships on order delivering around then. I think that we've prefer to save our funding capacity for little later. Products will start to come online second half of 2023 and we want to be able to play in those and if we had speculative shifts, we might not have been able to. So that's -- and I'm not sure, I just kind of recap 2020 should be pretty good. We don't have a lot of exposure to it, until the second half. 2021, 2022 not so great. At the -- by the end of 2023, projects, new projects start to come online again.
JM: Well said, Mark, and you know, we were talking earlier about the ships that you put on a fixed charter and you put three of these on, I want to say was in the 80s, lower to mid-80s, and we were talking about utilization, right. And a lot of times when we see these results from maybe some of your peers, we see that, wait a minute, they're only getting 70% or 60%, of what the brokers are reporting. Not only that, they're also only getting utilization of 70%. So is it safe to say that for your fleet -- for your TC that you're reporting, you're actually going to get close to 100% of that?
MK: We're going to get 100% of that to be very frank. You're right, the broker reports, we typically discount broker reports immediately for utilization. But that's not the only thing that happens on and we're not trying to bash the spot market by any means, because we do enjoy being a part of it at some point. And in fact, we're in it in LPG right now. But on the gas carrier, you're going to immediately start to suffer boil off losses and other things that don't occur on a brokerage report. And so we're happy to be where we are.
I guess just one more important point, if I may, and it's a business astray of what you've asked here, J, but two of these charters we've put on to Cheniere, another one to Petrobras, but the two on Cheniere, those were otherwise on charter to Yemen in past years, and so, that was a drag on earnings. And so not only were you earning a good charter rate, it's certainly much better when we were earning from Yemen. If and to the extent Yemen, restarts we will put them back at Yemen, but right now we're earning a pretty good charter from Cheniere on those two ships.
JM: Yeah, excellent. I mean, the Yemen thing has been moving around for several years now. And it doesn't seem like there's any clear visibility on that one, but it's good, you finally got those, was it Yamal's multi joint venture?
JM: Yes. So I know that was an issue with some of the refinancing at first, because it was on charter coverage, but it looks like you -- so now that went up. You know, we have about 25 people on the call today and those of Value Investor's Edge are probably very familiar with this, but we're going to release this call later as a podcast to much larger audience. And that's why I kind of went to that time-charter business. Because people will say, well 83,000 -- yeah, that's great, but I'm seeing rough reports that 120, 130, why are these guys? They don't participate in the upside. Why am I investing them? So it's like, well, wait a minute, if you, if you take down that 70% utilization, if you apply the discount to the rates you're seeing on the market, I mean, you're 80K, like a time, a long time time-charter, one or two or three years is equivalent to maybe like 110 or 120 if we're seeing on the spot market.
MK: That's one way to look at it and we typically look at it the other way, what's the actual rate, the time-charter equivalent of the spot rate which is lower, but you could look at it as being higher. No matter how you look at it, when we look at our peers results for Q4, I think we're feeling pretty good about having done our time charters.
JM: Excellent, excellent. So we'll hope to see that continue to improve. Did you provide any direct Q4 guidance in your earnings release with so many slides at that Investor Day that might have gotten a little buried there? Was there any sort of Q-over-Q forward guidance? I know there was a 2020 guidance.
Scott Gayton: Yes, I think when we -- we can look at it a couple of ways. One is you can go back and we did increase our earnings guidance for 2019 as a whole, by roughly 10% to 11%. And a lot of that's going to come obviously, in the fourth quarter, because we've already ticked off three quarters of 2019. And then we also gave out our usual forward guidance in the presentation. I think it was posted as an appendix on online, where we did see that our earnings will be going up, I think roughly by a few million dollars between Q3 and Q4. And that's where we go through and on a line by line basis, we give some of the puts and takes that we see. We've obviously got a number of vessels that are going to be delivering.
A couple of the Yamal ships, the Bahrain project coming online, some pure drydock days in the fourth quarter, than we had during Q3 and earlier in the year, and if you add all that up, I think is roughly about a 10% increase in earnings expected for Q4 over Q3. And again, if you can't find this, it is in a separate appendix on our website, and it looks exactly the same as we typically would provide quarter-over-quarter.
JM: Okay, excellent. Thanks, Scott. Yeah, I usually use that one when I look at the quarter-over-quarters, but your Q3 came in much higher than I was even looking for, it was very good results. Was that a factor of LPG or what's sort of driving that increase in terms of results?
SG: Yeah, we did actually provide, you know, the guidance that we did provide to go into Q3, it was up. Sometimes it comes down to timing, where we've got shifts to deliver maybe a little earlier than we expected. And some of it does come down to the timing of maintenance activities. So I don't think that there was anything major that led to some of that out performance in Q3. The biggest things for me is sort of the deliveries of what we have ships delivering is, is the biggest driver of increases.
JM: Right. And so let's talk about closing out the rest of that growth. You have -- correct me if I'm wrong, I understand you have five Yamal ships fully delivered and you have the sixth one coming here in maybe a few weeks.
MK: Yes. So we've taken what's called initial acceptance of our China LNG's last final Arc7 icebreaker. We took delivery of that on November 6th, I believe, and we're on target to take final delivery of the ship. That's when we actually draw down and pay for the ship from DSME on November 29th, and that will be happening at -- that's our estimated date. And then the only other thing we have in our books for delivery still and it's been a journey because we did have the world's largest LNG order books, almost bittersweet to be ending it, but the project execution is good.
The only other thing we have still on the books is the Bahrain terminal, the LNG terminal, the ships already been delivered, the FSU has already been delivered. But our 30% interest in the terminal remains, and we like the Arc7 hope to deliver that this year, if not this month as well. So we're on track for closing out a lot of project execution.
JM: Excellent. So it's fair to say without Murraine [ph], which we close out your growth program. The Murraine is definitely -- from what you can see today, definitely by the end of the year and then possibly in November, is that right?
MK: Never say definite, but absolutely. We've been -- I think if you look back at our project execution, it's been pretty good. And so when we say something's going to happen, it typically does. And best case and what we can see today, it's happening this year, if not the end of the month, but Insha Allah as they say, but, but I would say definitely.
JM: Okay, thanks, Mark. Yes, you know, I noticed the FSU that's attached to that has been receiving higher since it delivered, even though it's delivered over a year before the project started. Is there any sort of payment that you would receive if this project is further delayed due to reasons outside your control like downstream issues? Or is it just let's all work together to start this thing up and then we get paid there?
MK: So the FSU, as you say, has been earning full higher. And that's been a very good 20 plus year time-charter rate since September of 2000 -- of last year. As for the terminal itself, yes, we are of the belief that delay is due to no fault of our own, and that we will be compensated in one form or the other. And so we don't anticipate at this point, any loss from the project. We don't believe the delay is due to us. The current delay is due to as you say, is a downstream issue which we hope to be resolved very shortly within days is what I'm saying.
JM: Okay, excellent. Yeah, it would be nice to close out all the growth in 2019 and just fully focused on the final de-levering and getting to that in 2020 and beyond. And as far as the de-levering let's talk about that a little bit. It's also been kind of a question that's been asked here on Value Investors Edge. You started off with a 5.5 times target, I know it was basically around that 5.5, that's what you used. And then now it seems to be kind of a range of 4.5 to 5.5. So how do we think about that? Is that once we get to 5.5 and below is we're able to maybe spend more money on repurchases, dividend, but maybe just not go full bore, or is it, you're thinking we need to drive all the way down to 4.5 now?
MK: Sure, I think if we maybe refer back, everybody's got it on their screen to slide 79 and we do show the range of where we expected to be from a targeted net debt to EBITDA. And we do see that it will de-lever very quickly from 2019 to 2020. And that will continue all the way through into 2023. And this is importantly, just a simple status quo model. So this doesn't include increased distributions, increase buybacks, and or any growth.
So I don't think that we would have to say we'd have to be at the lower end of this range before we would look at allocating capital. I think we just have to know that we are on this track and with 100% of our revenues fixed this year, I guess what 97% next year or 92% the year after, we do feel pretty good that this de-levering profile will continue as we expect it to. So without any negative surprises, which of course you never know, but we don't expect, we do expect this de-levering to continue. And having that, having that visibility, and that foresight will allow us to allocate capital before we necessarily get to that bottom end of the range.
JM: Okay. It's good to see because when you look at that slide, you see that we hit that 5.5 range in the end of next year, which is only a year away now, right?
MK: That's right.
JM: But the 4.5, that brings us up to 2022. And when you're putting a discount rate on things, it does certainly make a difference. So it's good to hear that you're open to looking into that. And then we start to get a little more comfortable, right when you get to that 5.5 range. And earlier today at the Investor Day, you talked about potentially adding some future projects of growth, but you also mentioned that it would be a very selective process and it would be something -- I think you mentioned 2023 as a potential startup. Can you clarify are you mostly looking at trying to find the longer term employment for existing assets, or do you think that might be some sort of new build or new deal in Nash [ph].
MK: Well you're referring to is actually new growth. So at the second half of 2023 and probably more so Q4 2023, if not '24 onwards, we start to see a number of new projects. By the end as Scott said we look at de-levered at least, to the top of the range, but by then also through the bottom of the range depending on what else we've done. So we should be ready to have new growth at that time.
Now that new growth needs to be ordered as you know for LNG carriers took a long time to build it, it has to be ordered as early as next year. Even though the funding is not required next year. These projects Qatar is needing a lot of ships. Mozambique needs a lot of ships. The United States needs ships, there's a number of places that needs a lot of ships, including Russia, but we're going to opt out of Russia, we've already opt out of the Arctic 2 program.
So these are for newbuilds that we would look at. In terms of our existing ships, we'll have some roll up. I think those will be more suitable going forward for shorter charters. We're hoping to get the 12, 10s type of year charters on newbuilds. Existing ships might not be able to get that type of tenure anymore.
JM: Okay, yeah, I understand the timeline there, Mark. I think as investors look at the stock, they see a stock that's trading significantly under intrinsic value. And there's multiple approaches to that. I think you included a few in your slides, you included earnings per share to the concept. It was like a 25 or 30 range. You included EV to EBITDA range. I think that was in, I think, up to $38 at the peak. There are a couple good slides.
And I think you also mentioned you mentioned the NAV for your joint ventures. I think you said the book value is around the 14th. The NAVs around the 12s. And then you look, I mean, that doesn't even include the above market charters on those NAVs. So kind of a big wind up there, but I guess my question is, how do you think about growth versus repurchasing your stock? If it remains dirt cheap, like, let's hope it doesn't, right? Let's hope we get to 2020 and the stock's $25, $30. But look if the stock's $16 still or god forbid it's $14, how do we think about that?
MK: Yeah. No, I think that is a good question and you're right. We did give out some valuation metrics. And let's hope that we -- that some of that ends up pulling through into the actual stock price. I think the biggest overhang that we have right now, and this is based on a lot of feedback, and I'm sure you get it too J, the biggest overhang we have with the stock right now is really the leverage. If you screen us, particularly on an annual basis, you're going to see numbers that are the 8th and the 9th until we start to actually have some of this cash flow come through.
So I think that as that de-levering happens, and we screen better, and we can have, maybe investors who are less risk averse would look at us and start looking at the value that's there, then that would start to rewrite [ph] the stock higher. So I think that is one of our fundamental beliefs just the de-levering will actually lead directly to a higher stock price, which would then make the arbitrage between ordering ships and buying back stock a lot less.
JM: Yeah, I mean, I hope you're right on that. It's certainly prudent to reduce the leverage. But then again, we looked across the MLP space. And look, it's like everyone's been hypnotized by the de-levering fairy, everyone on the call is we're going to de-lever, we're going to de-lever, we're going to de-lever. And look your stocks are at all-time record lows across the board. I want to say, it's just a TGP thing, but it's really quite a lot of your costs are also suffering. In fact, you've actually done much better year-to-date than some of your colleagues. So how do we reconcile that is it just a delayed reaction to delivering or does the market really want what they say they want?
MK: Well, I think one way that we would say it is that we are trying to walk talk and chew bubblegum at the same time. So we are de-levering, we are buying back stock and we are raising distributions. And we are able to do that again, because of the size of our contract portfolio and the stability of cash flow that it does provide to us. I do think that this is a show me market, I think that a lot of people are out there saying I'm going to de-lever, but they don't necessarily have the visibility into their cash flow, that gives investors confidence that they will actually be able to de-lever.
And we are right now sitting around a 3.8 times coverage ratio that's going to go up next year, assuming all else stays equal. Many of them are actually down in the one times range, so they actually are not reserving any cash that they can use to de-lever. So I think we have to look even though they want to de-lever, the actual ability for them to do it is pretty constrained, because our cash flow is constraint. So I think that we are on the other side of that coin, we know our cash flow coming in, our de-levering is pretty much nailed down. We have obligatory debt payments of around 300 million per year.
And so long as we just operate our ships every day will have no problem doing that. Continuing to reward shareholders and then looking at doing things like you said, which is we've already spent roughly $30 million in terms of buybacks, can we increase that. If the stock doesn't react obviously had a good day today, if things start to go backwards, can we take advantage of that, I think that we do have sufficient free cash flow, that we will be able to do that. So then when more investors are looking at the space again, and they say Jesus, it's such a great deal, we have reduced the share account and all of us are better off.
JM: It's definitely a tough balance to thread the needle and work on all those things at once. And we just see this theme throughout the market where everyone's focusing on delivering at the same time that interest rates are going down and going down fast. And you would think, a little bit academic here, corporate finance, but employing your tax book, and if the rates are going down, and your EBITDA is not going down, then it would make sense to carry higher leverage in the market.
Now maybe that means you do 5.5 instead of 4.5 or maybe that means you do 5 instead of 4. But it would seem if your EBITDA is stable and you're confident in it, that you could accept a higher leverage today than you could maybe accept a year ago to you. Does that make sense to you guys? Or do even look at the LIBOR spreads and stuff like that when you consider these calculations?
MK: I would say that we look at it from an earnings point of view. But I wouldn't say that we look at it from necessarily a -- can we take advantage of it, obviously, we're going to do our best to lower our cost of capital at any time. Until that involves taking out as much high debt as you can. But necessarily linking exactly where interest rates are, and what type of return that leads to, I think, no, we look at a little higher level than that and just says, where's our overall leverage where we want it to be? How can we get there and what else can we do along the way to take advantage so long as you don't take our eye off that ball?
JM: Okay. That makes sense, Scott. Let's address maybe some of the risks or perceived risk of Teekay LNG Partners. You had this little issue with the COSCO right the sanctions that impacted your small joint venture because of China LNG. You've resolved those right you put on the press release, and you said that you haven't lost a single dollar in earnings from that…
MK: Or any other currency.
JM: Nothing else. No results are lost or anything, excellent. So what did you do specifically there? I know maybe a little bit of a sense of what exactly happened with that transaction. And how do investors like ourselves feel stable in this new structure?
MK: The solution was apparent from day one and it ultimately that's how it got resolved, obviously few weeks after the fact. And what happened was COSCO, a blocked entity of COSCO, 12th COSCO Dalian owned our 50% of our joint venture partner China LNG. The way that COSCO was able to unblock and as a result of the sub-China LNG being blocked, then there are 50% ownership in our JV in Yamal became blocked. The way it was ended, was COSCO Dalian. So that's interest in China LNG to a non-block part of COSCO. This was done with consultation with OFAC and the Justice Department.
And so as you said we didn't lose, the ships never went off-hire. We lost no revenue as a result of this. We're completely unblocked, it's business as usual. I think that in the future, there's no getting away from how important China will be to the LNG market. They're going to become the world's largest importer in a very short period of time, above Japan. And so I do see us continuing to work with China. I see this in our Chinese partners. I see this as a relative blip. We take sanctions extremely serious.
I'm American citizen myself, I take them as serious as anyone else. But I think this is something you work through. The LNG carriers were never intended to be touched by this sanction. It was intended for Iranian oil gas. And it was just a -- it was collateral damage has now been resolved.
JM: Yeah, makes sense Mark. And that was our initial read as well as this was an accident, if anything. It just is an unfortunate kind of timing with your last Investor Day and stuff. But sounds like they have worked it out and the ownership structure is definitely divested and separated from anything associated with Iran at all. So that is good to hear.
That was kind of the main risk that kind of got flagged right last quarter, and people were talking about that. Let's look at your forward guidance, not necessarily at risk, but there's a $30 million spread their between sales and highest expectations. What are the factors that play into $30 million spread? Is that recharging of LPG? Or what was that made of?
SG: Yeah, I mean, re-chartering is going to be some of it, but I think we've only got kind of net one ship that's going to be coming up and that's not till the middle of the year. So I wouldn't think that has a lot of movement. We do have LPG rates that get baked in here. And I think Mark said on the call today that $5,000 move can be plus or minus around $12 million to $13 million of EBITDA. So again, if we put a line in the sand, and if it were to go up or down from there, then there is some movement potential.
The other thing that we try and account for in that range is that you can always have ships that go off hire, not due to -- we would build in known dry docks. But you can always have an issue, we're running a fleet of over 80 ships, including our LPGs around 49 LNG carriers. Things can always happen and so we try and build in some flex, such that if you do have a ship that goes offline for a week or two here or there that we wouldn't miss our guidance.
JM: Thanks, Scott. And look, I don't want to insult anyone on this live call. We up to about 40 people now, but understand this is going to go public a little bit later. Can you just confirm what sort of earnings multiple you're trading at into 2020?
SG: Yeah, it's almost embarrassing to say, because it makes me think there's something wrong and but, believe me, we don't think there is. But I think part of the problem is having the broader analyst committee. A lot of the investors actually looking at earnings as a way of calculating stock prices. This is relatively foreign. I've been at Teekay for 18 years. And Mark, I think you're a little over that. I used to be the CFO of a Tanker Company within the Teekay organization as well.
We understand that most investors don't want to look at earnings, because they can't predict them. We do think that this is a different animal with the stability and the length of our charters and the amount of coverage that we do have that earnings and EBITDA multiples for that matter should actually be used by the analyst community to come up to a stock price.
So that's, that's my soapbox for a minute. But on slide 66, we say that we're trading at around 5 times 2020 earnings. And if we were to simply trade where the rest of our peers do, and this is a pretty wide set of companies out there, J most of which I'm sure you cover as well. That -- they all trade around 9.7 times earnings, so we'd be at $25 to $30 stock. So that is part of the table that we're founding is to get people to really appreciate our earnings.
And I think with the 2019 numbers that we raised yesterday, and then we gave the earnings guidance for 2020, which is up, $40 60% over last year. We really hope that people are going to start to look at those earnings as they come through.
JM: That's just, it's just unbelievable to see a stock like yours trading at five times earnings and really, really good, roundabout way of coming to an answer, Scott, I know it's like a trick question or something. And you want to ask you what earnings you're trading and you have to say five times, man, what is this like a coal miner at the peak, like you buy an auto manufacturing in China, I mean, it's just unbelievable for, not to be offensive, but almost a boring finance structure, like to have your shipping company.
But when you really think about it, your financing structure. I mean, you're not a whole lot different than I mean, in my view, at least something like maybe SFL Corp, ship and answer something like that. And to see five times earnings. It's just remarkable. But anyways, I think we've hit that one enough. I got about 40 people here in a call. We got some questions. If you gentlemen are ready, we'll get to some of those?
JM: All right. Fantastic. So we already incorporated a few of those into our discussion. But look, we talked about your coverage ratio, and it's looking at almost four times coverage going forward. You raise the dividend to $0.25. You said you're going to do that correct me, if I'm wrong in there. And is part of the Q1 2020. That dividend is very easily covered. You're also bringing in $100 million free cash flow from AWilco.
SG: That's right.
JM: Simultaneously, you're also paying down debt related to Wilco, which helps your de-levering. How much of that $100 million to be allocated to some sort of shareholder returns or is that all meant for de-leveraging?
SG: I would say at this point we have we've given the guidance like you said for our distributions. We do have $100 million buyback program outstanding which we've completed roughly $30 million. I'm not going to give any guidance that says we're going to spend the remaining 70 and any immediate length of time. But I would say that all of this is just simply building us flexibility. And I did say on the call today that the de-levering gives us a lot of flexibility to continue to allocate capital and obviously, shareholder returns are one of our primary places to put that money. And so really, that's our focus for this this year and into next is how do we optimize the capital that we do have and how do we make sure that we're running this company for the long the long term and rewarding shareholders along the way.
JM: Yeah, I know it's kind of a non-answer at points, right? Because you don't know exactly what you're going to do with it. But you do have a NOK bond coming up here in May. Is that something you're considering rolling or is that going to be mostly paid down?
SG: Yeah, we could pay that off our debt for cash or we could pay that off in May given where we expect our recorded the balance to be. I did provide a slide during the call today that show that we are very competitively priced in Norway. And so it is something that we are considering and especially with the base rates haven't come down over the last six months. I think we could actually borrow quite cheaply. So there is a level of whether you call it insurance or whether you call it just wanted to have that extra cash to the bank so that you can use it for periods of dislocation, whether it be in the equity markets, in the shipping markets whatever. I think that we would like to probably roll it. We have about $135 million that's rolling in May. My sense is that we will stick to our de-levering message and reduce the size of it if we do decide to roll it in the $75 million to $100 million range.
JM: So Scott, what I'm hearing from you and I tell me if I'm wrong, I don't misquote you. But what I'm hearing from you is you could probably roll the entire thing if you wanted to. And it sounds like the rates that you'd be getting with. I mean, I know you can't state what rate you would get. I wouldn't be smart before you talk to the banks. But on that slide you presented the rates are very, very, competitive , very broad range. But don't pigeonhole. Yeah. But I mean, we're talking like sixes and sevens, stuff like that.
So look, I mean, you could roll the whole thing at sixes and sevens, pretty broad range. And your stock. I mean, it trades it five times earnings right next year. And it trades at a DCF yield. I mean, you mentioned mid-300, next year, right? So it trades a DCF you hold up in the 20s. So what would stop you from just rolling the whole thing sixes or sevens and doing like a tender offer or doing a repurchase at 20 or 25?
SG: Yeah, that is an option that we have. I think that you're right that we could probably be in the sixes and the low sevens in order to roll the bond. But I guess I go back to some of what we've been talking about. And I know it's banging a drum and it's not one that's overly exciting to a lot of people is that does go kind of counterintuitive to what we're planning with respect to reducing our leverage. And so the trade that you talked about makes a ton of sense on paper. But I do think that that actually is adding risk and we're probably an environment where taking some of that financial risk and some of that financial leverage off the table is probably better long term for both the business and for long term investors.
MK: I guess it's twofold. Scott. We talked a lot about de-levered but we also talked about permanent capital.
JM: Yeah. Okay. It's just interesting to see that. I mean, I know you're focused. And it's been clearly messaged at this point, but your focus is on de-levering. But it's not clear yet, right? We're not clear yet. If the market will give you credit for that. Hopefully, they will. It would be great for you to de-lever into 2020 and 2021, and for the market to finally give you credit. And you expect them to give you credit, right. So if you expect them to give you credit and for it to be $25 or $30 or somewhere like that. It doesn't make sense. I mean, repurchased a little bit more. I mean, maybe not all the maybe not all the NOK bond but a little bit higher than you've been doing?
MK: Yeah, yeah. I think that there is some validity to that argument. Like I said, I -- we have been buying back stock, we've taken 3% off the table, which I think is relatively aggressive to a lot of the energy companies are out there right now. We did just raise the dividend today. That won't be seeing till May. I would like to let some of today's news soak into the stock a little bit before we start to really decide whether there's still a great opportunity for it. I think it's just a little bit too early to tell at this point.
JM: Okay. Hopefully, you'll keep those options open as you go forward into 2020. And look it's a cyclical market. I mean the last year has been mostly good for you. But like in 2018, the tail end of that was nasty. So that happens again, it would be good to know that surely.
If you guys crash into some ridiculous like the 12th or 13th. Again, it'd be good to know that you guys are going to let that opportunity pass up.
MK: You're right. There's a number of macro factors here just to point of seeping in not only did last year we had some MOP issues, you have a market Dow that's been ripping for a while. And we're not quite sure when and how that that goes. So we need to get caught out on a big fight back.
JM: Let's stop talking about paying down debt because it's good. I mean, it's prudent in the long term to pay down your debt, but it doesn't interest a lot of investors at this point when they see a stock so cheap, they do want repurchases. But look, they also want dividends. And there's a belief and I don't think it's an unfounded belief that dividends drive from stocks. And I don't think I mean, your results were fantastic today. But I was very pleased, but I don't think it's coincidence that you raise your dividend by a healthy amount more than 30%. And the stock responded. I don't know, we can't -- we just say like, you can't test a negative [indiscernible] or whatever, you can't.
We don't know what would have happened if you would have just said nothing or said it's going to stop it at $0.19 or whatever. But I imagine like. I guess, I put out a proposition though that your stock went up quite as much. So your DCF is at 350 or mid-300. So let's not misquote you there next year. At what point is it 5.5 or 5 or 4.5? And I'm getting a little bit precise here. But at what point do we start paying off a higher percent of that? Because your coverage is four times, right? So you're really just -- you're paying a dividend, but you're de-levering so much harder than you're paying a dividend. At what point does that says NOL come back, and it really starts to excite people with these bigger payouts.
MK: I hate to disappoint. But I think one thing we're not going to get drawn on after such a big news is have we been for the last year we've been talking about a modest dividend. And to your point, I think the market has received today's news as more than modest. And so we've just done this in -- and to talk about what we're going to do next on the dividend. I think it's premature.
So we've given hopefully, good news. And I agree with you that is -- it's not just good results. It's one of the reasons our stock is done well today. But I don't think we're going to get too drawn on '21 -- at 2021 at this point.
JM: Okay. And I know you said you're not going to get drawn on that. So you don't want to pigeonhole you to precise timetables. But I would encourage you, as a company and as your entire group to do more of these types of events. I think today's Investor Day was helpful. We had a few people that attended in person, and they were very pleased with your presentation and your openness. And this was the first Investor Day in five years. So I would encourage you to maybe do an Investor Day next summer or next fall at the latest and continually update the market on that.
Would it be fair to say that the $0.25 dividend is your 2020 payout and then you would reassess in say October November? Is that fair to say? Or you don't want to take that sort of?
SG: No, I think that that's right. I would say that we actually talk about shareholder return policies every quarter with our Board, whether it's distributions or whether it's buybacks. We do talk about every quarter. But given the long term nature of the business, I think that we condition people, if you will. And most MLPs would look at doing annual type increases. And so I think that around this time next year is probably a safe assumption.
MK: Just to kind of take a point. I know that the average investor doesn't really like talking about leverage. But for whatever reason, why are we trading so low? And we do believe that it's our leverage that is perhaps the biggest overhang on our stock today. So hopefully, that moving down the leverage, regardless of whether they want or not is going to make it move.
As Scott's mentioned before, when people look at Bloomberg, they can't see the predictability of our cash flows or the rapidity at which we're going to pay it down. They just see today's leverage and a lot of these guys can invest. So hopefully we can get beyond that, that screenshot that's preventing a lot of investors from coming in on us.
JM: Do you think there's a similar sort of screenshot or a Bloomberg presentation or Google Finance presentation or Yahoo Finance presentation that looks at your dividend yield, as well?
MK: Yeah, they do for sure. And I would say that investors will look at that. But that's a double-edged sword. I would say that we were trading before today, I think we were turning it around a 5%, 5.5% yield. If we add in the buybacks, I think I said today we're a total of close to 10% yield. And that to me feels pretty good. But if you look at some of our LNG shipping peers, they're now starting to tick up into the 11% and 12% range. And in my opinion, that is difficult from a corporate finance point of view to be paying out that level of dividend. Because while it may be good for investors, it doesn't feel very good as a management. Because you're actually not getting rewarded for the cash you're paying out.
And then that that also can be a downward spiral because then investors say, if you're 11% or 12%, what am I missing? I must be missing something here because ultimately that to me, spells risk. And so there's a fine balance there that says they paying out a very high yield is not always a good thing.
JM: Yeah, I mean, they can get kind of circular if we go into a too far out on either topic not paying debt or on paying dividend. I write on Seeking Alpha we have over 11,000 followers there. And in an efficient market, you would think that stock would be valued on either EBITDA or some sort of multiple like that. You would think to peers that are the same business would have similar valuations. If anything, you would think the company with longer term charters and better assets would have a higher valuation. But look, I mean you see this dividend yield thing and you wouldn't believe the amount of questions I get on -- and I realize it's a retail platform. But look, retail drives these things.
I know you guys talk to institutional investors and that sort of thing. But look, I mean, retail investors drive these things, and they look for yields. And I know that's not -- if we believe in efficient market, that doesn't always make sense. But I would just encourage you, right as you go forward, to think about splitting those. And I think you split it this year. I think you did 30% increase, but I would hope going forward, once we get closer to that de-leveraging target, I would hope those yields can grow a little bit faster.
And obviously we want the stock to be really high. So I guess in a weird sort of way, that would be a lower yield. But the payout, definitely to be higher. We'll shift off that because we've really beaten the horse in the ground. I think we've really hit the de-levering and dividends.
Few more questions here, a little bit of a different tone before we wrap up the call. Looking at your forward growth perspective. So you mentioned 2023 is the absolute earliest you would be interested in any new projects. You mentioned sort of maybe some industrial type stuff. Is there the type of stuff similar to this Bahrain Riyadh facility where you could -- because that really differentiates you guys a little bit. Operators and it's not just a ship charter?
MK: So it's not necessarily 2023 the end of '23 that needs to be the earliest. As you've seen, are de-levering path earlier, it's just that when we're seeing the projects, if they would come earlier than maybe we're interested in slightly earlier when are de-levering is done. To your point about the projects, kind of we have a very diverse portfolio, we have the most diverse portfolio in the business. And there's basically two types of projects which you can do. You can do the long the long term charter, which is at low rates, it's your investment grade. That's the type of Qatar projects.
Then you can do the Bahrain products, which are higher risk reward than the other one. We will continue to seek both sides of the coin. It's part of a portfolio. So yes, we will look out we will look for more I can't say Bahrain type of projects, but high risk, high reward products will always hopefully complement our long annuities projects.
So in simple terms, Qatar is coming out with 60 ships, that is what it is. Another opportunity perhaps as an example, Mozambique. That's more along the lines of a higher risk reward.
JM: Excellent. So you mentioned Qatar and Mozambique. Is that relatedto like [indiscernible] looked into that project or is that separate.
MK: The Qatari project covers a lot of ground. It covers expansion and it covers Golden Pass, it covers all the things that Qataris are doing. The Mozambique is restricted to the -- and a former [indiscernible] project. These are just examples by the way, J. So we might --we have a number of opportunities we can certainly look at. In any event, we're not going to be going back and trying to get the world's largest selling order book for the sake of having that. It will be selective growth. So I'm not sure we do it all. In fact, I'm pretty sure we're going to do less. But that's how we look at it all.
JM: Okay, if I take a framework, and I have said I going to stop beating horse. Well, just one more circle back before we wrap up the call. You look I mean, if you take a project like Yamal, which I believe you mentioned mid-10s unlevered and you slab 80% leverage on that at 6% fixed, like it looks like you did -- 75%, that 75 is still quite high.
You get an ROE in like the 30s low-30s. Is it fair to say that when you look at growth, you use some sort of similar calculation to see what your return on equity is? And is it fair to say that you would look at your return of equity of growth versus maybe your DCF yield or something intrinsically, to kind of make that decision? So maybe you wouldn't grow it, you wouldn't do any growth at 12 but maybe you might do some growth at 20 or 25.
SG: Absolutely, yeah, we do look at repurchases as simply buying. What we think is one of the best fleets LNG fleet out there is by buying stock or buying our own ships. And so we absolutely run that calculation that says, should we be putting money into something that's obviously got build risk, it's got completion risk, all those other things, whereas our ships in the water today are a lot less risky than then some new projects could be. So we absolutely look at that and make sure that we're, we're holding our head high and so that this project has to pass more hurdles and then buying our stock back.
JM: Thanks, Scott. I think that's really the concern of investors is they say, when you talk about growth, their ears perk up and they say, wait a minute, why are you looking at growth. First of all, because your stocks are so cheap and then second of all, there's a fear of dilution. Right. And it sounds like you have no intentions of issuing stock anywhere remotely close to these levels is that fair.
MK: Absolutely fair. And to Scott's point, yeah, the first investment we look at is always our own fleet. Very happy with the portfolio we have. It's all executed. So that's the first place we look in terms of growth.
SG: And I think we also need to look that we've taken on in the last four or five years, about $3.5 billion of growth, and we didn't issue a share. So I don't think there's any other MLP, let alone companies that have gone through that level of growth. We've almost grown our fleet by 50%. And none of that has been done through the capital markets. And so I would say that that's something you've heard from us. You've heard Teekay say that as well. I'd say is something that we take very much to heart. And for us to go back into the markets, it would have to be for a really, really good reason.
JM: Excellent. Thanks for that, Scott. I think That does assuage some of the peers around your growth. Because it is definitely there's a lot of thinking and modeling and that sort of thing that goes into it. It's not just want to grow for the sake of growth.
MK: When we mentioned growth, to some part, we're just talking about in the basic sense, what can we do on retained earnings. And we can do a fair amount on retained earnings based on where we're going. So it doesn't necessarily -- we are certainly not going to go in issue equity for growth unless it makes absolute sense.
SG: And we're also very cognizant of the fact that this is not the market that we had in 2014-2015. We lived it. We were there. It wasn't a question of do you grow it was how fast and it was never fast enough. So we also understand that we are very much in a different market. And so we do not want to get back on that internally. We call it the treadmill. There is nobody internally or on our border or even investors for that matter that want to get back on the treadmill.
So anything we do would be done as smart as we can.
JM: Excellent. Thank you. Yeah, we'll do one final question. Then we'll wrap up. I know you've got a busy day both behind you and a little bit more in front of you. So I appreciate your time. We're looking at the core assets if you will of Teekay. And I know you spoke a little bit to this earlier. But look you got the LPG ships with [indiscernible] even it sounds like that's a long term business for us.
MK: We like that franchise. It's been a great investment for us.
JM: Excellent. And then the smaller multi-gas ships. Are those core and non-core.
MK: Not so great. hasn't been a great investment for us. It's been a drag. I think those of you who are familiar with our company know that it's been a drag on us. This is the Skagen [ph] it was a dragon or Skagen. The good news is that it is no longer a drag. We've improved the revenues, we've improved the expenses, we've improved the utilization, But to your point J, no, it's not core business. It is not a lot of sellers, and we don't need to necessarily sell. It's only worth about a half an LNG carrier so we're not dying to sell that fleet. But we will at some point when the time is right.
SG: I will point out just to defend Mark a little bit. There's been some amazing work done by the team on that fleet. If I look last year that fleet alone was negative $3.3 million of adjusted EBITDA. And this year, we were close to a $1 million positive. So there's been some amazing work done to get those ships up to at least some level of tradability.
JM: So there's no longer a direct drag, but it's definitely not producing anywhere near that sort of ROE that you initially hoped for?
JM: Excellent. Well, thank you very much for your time today. That concludes our live Value Investors Edge call. Just a reminder on disclosures I am long shares and TGP and Teekay, and nothing you heard today constitutes investment advice or any sort of forward guidance. Thank you, gentlemen, for joining us.
MK: Thank you, J.