Euroseas is a relatively small player in the industry with 5 dry bulk ships, 9 container ships and 1 multi-purpose vessel. The company has been growing its fleet at a steady rate by adopting a disciplined approach to acquiring vessels. After issuing additional stock last year, the company has over $105 million in cash to spend as well as an additional $100 million in available credit.
Management has stated a willingness to leverage its portfolio up to 50% which could lead to purchases of up to $400 million. Since issuing the additional stock, management has inspected 10 ships as potential targets but has yet to make an announcement about a purchase of any one of these vessels.
With scrap values for retired ships continuing to climb, it would seem that the strategy is likely to pay off as long as management does a good job forecasting the useful life of each purchase, and maintains each vessel at a cost effective level. Once it becomes too cost intensive to operate a fully aged ship, the company should be able to sell the vessel to a scrap company who will likely pay top dollar for the steel and other materials.