FRO is perpetually between $5 and $10 and $8.65 is $1.75Bn in market cap and this should be a good year for them with shipping rates rising. In a good year, they can make $200M+ but what I really like about them is great options to sell and an 0.50 (seemingly annual) dividend:
| Year End 31st Dec | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | TTM | 2021E | 2022E | CAGR / Avg |
|---|---|---|---|---|---|---|---|---|---|---|
|
$m
|
459 | 754 | 646 | 742 | 957 | 1,221 | 1,003 | 502 | 748 | 21.6% |
|
$m
|
277 | 170 | -196 | 82.7 | 240 | 508 | 324 | 12.9% | ||
|
$m
|
155 | 117 | -265 | -8.88 | 140 | 413 | 276 | 82.9 | 293 | 21.7% |
|
$
|
2.38 | 0.745 | -1.56 | -0.052 | 0.781 | 2.09 | 1.40 | -2.58% | ||
|
$
|
1.56 | 1.20 | -0.509 | -0.091 | 0.762 | 1.99 | 1.33 | 0.216 | 1.44 | 4.99% |
|
%
|
-76.3 | -23.0 | +161 | +7.13 | -89.1 | +564 | ||||
|
x
|
4.39 | 6.54 | 40.4 | 6.08 | ||||||
|
|
0.072 | 0.160 | ||||||||
In the Dividend Portfolio, let's:
- Buy 2,000 shares of FRO for $8.65 ($17,300)
- Sell 20 FRO 2023 $10 calls for $1.50 ($3,000)
- Sell 20 FRO 2023 $7 puts for $1.40 ($2,800)
That's net $11,500 or $5.75/share and, if assigned 2,000 more at $7, our average would be $6.375, which is where we wish we'd caught them. So that's our worst case and best case is we get called away at $10 with $20,000 plus maybe $1 in dividends is $2,000 more for a net profit of $10,500 (91%) in 18 months. Not bad for a conservative play!
