Viking Supply Ships

Summary: Viking’s equity has limited downside, 45-80% upside, and a hard catalyst to realize value in the next few weeks.

Viking is listed in Sweden and announced on Aug 10 that they had sold 3 of their vessels. We estimate this was for a price of roughly $380mm. The company has net debt of $203mm and a market cap of $193mm meaning that the cash from the sale will be enough to repay all of the company’s outstanding debt and pay a special dividend equal to almost the entire market cap. In addition, the Viking stub will still own 4 high quality vessels that are in total likely worth $175mm at replacement value, or 60% of that in the event of an immediate liquidation. The stock therefore has limited downside and 45-80% upside. This opportunity exists because only 21% of the stock is floating and mostly owned by retail investors. The market cap was just $27mm prior to the sale and has rallied 715%, which has sparked a round of profit taking. The remaining 79% of the company is owned by a Norwegian investment firm that reported on Aug 22 they expect a special dividend when sale of the 3 vessels closes (at the end of August). This hard catalyst means that Viking offers 45-80% upside but an even more compelling IRR.