Tufton Oceanic Assets : 3Q20 Factsheet

Tufton Oceanic Assets Limited (SHIP)

3Q20 Factsheet

KEY STATISTICS

as at 30 Sep 2020

(unless otherwise stated)

No. of Shares outstanding	255.04m
Share Price	$0.84
NAV	$242.80m
NAV per share	$0.952
Premium/Discount to NAV	-11.8%
Target IRR (long-term)	12% p.a.
Target Dividend / Share	$0.07

Management Fee: 0.85% of NAV (no fees on cash)

Performance Fee: 20% of excess return over 12% net hurdle, partially paid after 7 years

INVESTMENT MANAGER

Tufton Investment Management Ltd

Albemarle House, 1 Albemarle Street

London, W1S 4HA, UK

The Investment Manager recently changed its name from Tufton Oceanic Ltd to Tufton Investment Management Ltd as part of an

INVESTMENT OBJECTIVES AND STRATEGY

To provide investors with an attractive level of regular and growing income and capital returns through investing in a diversified portfolio of secondhand commercial sea-going vessels.

PORTFOLIO HIGHLIGHTS

Operating profit for the quarter was slightly lower than 2Q20 due to planned special surveys on two Product Tankers and the impact of short term, lower rate charters (which end in 4Q20) on four vessels. The portfolio benefited from fair value gains in Containerships as the strong rebound in demand and time charter rates over 3Q20 drove asset values higher. After the end of the quarter, the Company acquired two Product Tankers for $23m bringing the fleet to eighteen vessels. Both vessels are on fixed rate time charters for three to five years. A subsidiary of the Company entered a $24m 5-year non- recourse term loan with an all-in cost below 5.0%. The new loan will be secured on four of the Company's Product Tankers with charters of c.2.5 to 3 years plus charterers' options to extend. As part of its continued commitment to crew welfare, the Investment Manager has made it a high priority to address delays in crew rotation arising from Covid-19 related travel and quarantine measures. At the time of writing, the issue has been resolved in most of the vessels in the Company's fleet and only an average of c.11% of crew on board the Company's fleet were overdue for rotation. This is better than the average of 15-20% of crew overdue for rotation in the industry.

DIVIDEND

The Company declared a dividend of $0.0175 per share, payable on 20 November 2020. The Company continues to target a total annual dividend of $0.07 per share and is forecast to have a dividend cover of c.1.4x when fully invested.

internal reorganisation within the Tufton group. The Tufton group was founded in 1985 to provide financial services to the maritime

and energy industries and since 2000 has concentrated predominately on investment and asset management. The Investment

Manager is authorised and regulated by the Financial Conduct Authority and has offices in

London, Isle of Man, and Cyprus. Tufton is fully dedicated to the maritime industry with an in-house research team and Asset Manager

providing operational and accounting services to each vessel within the portfolio. The

Investment Manager is committed to Responsible Investment by integrating ESG principles into its investment process and is a

signatory of the UN PRI since December 2018.

Fund Managers:

• Andrew Hampson: 43 years of experience in banking and shipping finance. Joined Tufton in 2001.
• Paulo Almeida: 26 years of experience in fund management, investment banking and the shipping industry. Joined Tufton in 2009.

Signatory to

INVESTMENT OUTLOOK

The recovery in Containership demand that was apparent from Tufton Realtime Activity Capture System (TRACS) analysis of satellite data at the end of 2Q20 continued into the third quarter propelling time charter rates and asset values higher. Strong consumer demand from developed economies, supported by fiscal stimulus measures, continues to drive Containership demand. TRACS data show that Bulker demand also continued to strengthen, supported by increasing iron ore imports to China as the steel industry was restarted after Covid-19 related restrictions were lifted. Smaller bulkers have also been supported by growing grain exports from North America and the Black Sea region. On the other hand, Tanker demand was weak due to OPEC production cuts and a relatively slow recovery in oil demand growth after Covid-19 related travel restrictions were relaxed. Further, tonnage released from floating storage is likely to remain an overhang on the Tanker market for the rest of the year. Fortunately, all the Company's Tankers are on fixed rate time charters into 2021. The Crude Tanker (Bear) has a fixed rate component plus a profit-share mechanism.

The Investment Manager is positive about Containership and Bulker asset values responding to increasing time charter rates. The recent acquisition of the two Product Tankers, at attractive pricing, continues to demonstrate the Investment Manager's ability to source and structure transactions that meet the Company's investment policy even in the current difficult markets.

All Rights Reserved. Published 26 Oct 2020

Tufton Oceanic Assets Limited (SHIP)

3Q20 Factsheet

COMPANY INFORMATION

	3rd Floor
Registered	1 Le Truchot
Address	St Peter Port
	Guernsey, GY1 1WD
Listing	Specialist Fund Segment of the
London Stock Exchange
IPO Date	20th December 2017
ISIN / SEDOL	GG00BDFC1649 / BDFC164
Ticker	SHIP
Dividend	Quarterly
Frequency
ISA / SIPP	Yes
eligible?
Website	www.tuftonoceanicassets.com
Email	[e-mail]

BOARD OF DIRECTORS

Robert King (Chairman)

Paul Barnes

Stephen Le Page

Christine Rødsæther

PORTFOLIO PERFORMANCE

The portfolio recorded a fair value gain of $0.015/Share as Containership values rose and also benefited from the acquisition of the two Product Tankers at attractive prices. Operating profit after costs and fees was slightly lower than 2Q20 at $0.023/Share due to the planned special surveys on two of the Product Tankers and the impact of short-term charters at relatively low rates on four vessels. Based on current market conditions, vessels coming off charter over 4Q20, representing c.12% of NAV, are likely to benefit from the improvement in time charter rates. NAV total return for the quarter was 4.2%.

															$1.00
															$0.98
														$0.96
							$0.015		(	$0.0175)
				$0.023
												$0.952		$0.94
	$0.931														$0.92
															$0.90
	NAV	Operating	Fair value	Dividend		NAV
30 Jun 2020		profit	gain/(loss)				30 Sep 2020

FLEET NET YIELDS

CORPORATE ADVISERS

Hudnall Capital LLP

Adam House, 7-10 Adam Street

London, WC2N 6AA

Andrew Cade: [phone]

N+1 Singer

1 Bartholomew Lane, London, EC2N 2AX Alan Geeves: [phone] James Waterlow: [phone] Sam Greatrex: [phone]

ADMINISTRATOR & SECRETARY

Maitland Administration (Guernsey) Limited

(per registered address above)

Leasa Callaway: [phone]

CORPORATE CALENDAR

AGM	20 Oct 2021
Reporting period
end	30 Jun 2021 (FY)
Dividend Calendar

The run rate yield from existing charters on the fleet is 13.2% after management fees and capex. Average expected charter length is c.2.5 years (EBITDA weighted). The low yield in Bulkers and other Containerships is because one Containership and all three of the Company's Bulkers are on short term charters at low rates that started during the height of the pandemic. These vessels come off charter over 4Q20 and we expect they will find new charters at higher rates based on current market conditions.

				30%
	18.9%			20%
12.9%		13.9%	12.6%	13.2%
						10%
			2.4%
						0%
Product	Crude	Gas	Containerships Bulkers	Fleet Avg
Tankers	Tanker	Tanker

PORTFOLIO OVERVIEW

1Q

2Q

3Q

4Q

Vessel Type

Charter Length

Vessel Age

Vessel Charterers

20

20

20

20

Release

30

30

26

21

date

Apr

Jul

Oct

Jan

Ex-dividend

7

6

5

28

date

May

Aug

Nov

Jan

Record date

11

7

6

29

May

Aug

Nov

Jan

Containerships

< 1 year

1-3 years

5-10 years

Across ten

Payment

26

21

20

12

Product Tankers

10-15 years

charterers

Gas Tanker

3-5 years

date

May

Aug

Nov

Feb

Crude Tanker

Bulkers

15-20 years

Other N et Assets

Cash

All Rights Reserved. Published 26 Oct 2020

Orderbook as % of fleet

Tufton Oceanic Assets Limited (SHIP)

3Q20 Factsheet

SHIPPING MARKET REVIEW

Demand for Containerships and Bulkers improved over 3Q20. TRACS data show Containership demand was 8% higher YoY at the end of 3Q20. The rebound in time charter rates was led by the larger Containerships but by the end of 3Q20 the strength had cascaded down to the smaller ships as well. Strong consumer demand in developed economies, supported by fiscal stimulus, continued into the fourth quarter and may do so into the holiday season.

Containership demand

				2019				2020
01-Jan	01-Feb	01-Mar	01-Apr	01-May	01-Jun	01-Jul	01-Aug	01-Sep	01-Oct	01-Nov

01-Dec

180

170

160

150

tonsm	140
	130

Source: TRACS

Bulker demand

				2019			2020
01-Jan	01-Feb	01-Mar	01-Apr	01-May	01-Jun	01-Jul	01-Aug01-Sep	01-Oct	01-Nov	01-Dec

450

420

390

360

tonsm	330
	300

Source: TRACS

Demand for Bulkers also recovered over 3Q20. TRACS data show Bulker demand was 6% higher YoY at the end of 3Q20. The rebound in Bulker time charter rates was led by the larger vessels carrying iron ore into China but cascaded down to the smaller vessels by end of the quarter. Both Bulker and Containership values continue to lag the improvement in rates. Tanker demand peaked in early May with OPEC production cuts and ended the quarter flat YoY. Tanker demand is likely to recover with oil demand growth and reversal of OPEC production cuts. Time charter rates for Tankers may remain subdued for rest of the year as tonnage in floating storage slowly returns to the market.

Tanker demand (crude and product)

290

Orderbook

60%

270

50%

New orders

250

fleet

40%

30%

230

%

As

20%

tons

210

2019

2020

10%

m

190

0%

01-Jan

01-Feb

01-Mar

01-Apr

01-May

01-Jun

01-Jul

01-Aug

01-Sep

01-Oct

01-Nov

01-Dec

Aug-02

Aug-04

Aug-06

Aug-08

Aug-10

Aug-12

Aug-14

Aug-16

Aug-18

Aug-20

Source: TRACS

Source: Clarksons Research, Tufton

While much has been written about the negative impact of Covid-19 on shipping demand, the pandemic has had a positive effect on shipping supply. As at the end of August, YTD new orders were down 49% YoY. The Orderbook declined to below 8% of fleet. Consequently, global fleet growth is expected to slow from 2.6% in 2020 to 1.7% in 2021. Tufton believes that the declining fleet growth will support time charter rates and secondhand vessel values in coming years.

Disclaimer: The information in this document has been prepared for information purposes only and does not constitute an offer or solicitation for the purchase or sale of any investment or financial instrument in Tufton Oceanic Assets Limited (the "Company") and should not be relied on by any person for the purpose of accounting, legal

or tax advice or for making an investment decision. The payment of dividends and the repayment of capital are not guaranteed by the Company. Any forecast, projection or target is indicative only and not guaranteed in any way, and any opinions or views expressed in this document are those of Tufton Investment Management Ltd (the "Investment Manager"), and do not constitute investment advice and are subject to change without notice, and neither the Company nor the Investment Manager is under

any obligation to update such opinions. Any potential investments identified by the Investment Manager are prospective only and there is no guarantee that the Company will proceed with any of them. Past performance is not a reliable indicator of future performance, and investors may not get back the original amount invested. Unless

otherwise stated, the sources for all information contained in this document are the Investment Manager. Information contained in this document is believed to be accurate at the date of publication, but neither the Company nor the Investment Manager gives any representation or warranty as to the accuracy or completeness of the information in this document. This document does not contain and is not to be taken as containing any financial product advice or financial product recommendation.

Neither the Company nor the Investment Manager accepts any liability whatsoever for any loss (whether direct or indirect) arising from any use of this document or its contents. Tufton Investment Management Ltd. is authorised and regulated by the FCA, registered in England & Wales (Registered Number: 01835984). Registered

Office: 1 Albemarle Street, London W1S 4HA	All Rights Reserved. Published 26 Oct 2020