MPC Containerships: Perhaps the Best Supply Segment Player (OTCMKTS:MPZZF)

investment thesis

MPC Container Ships (OTCPK:MPZZF) recently reported another strong quarter. Its Q2 earnings were $84 million on revenue of $131 million. It declared a $0.10 dividend, its 11th in a row, bringing its yield to about 28%. 76% from 2025 and 42% from 2026 are already fixed at reasonably good rates.

Since we took over coverage of MPZZF in Q4 2023, the company has continued to execute on its fleet optimization strategy. This resulted in a relatively new fleet on the water and low operating leverage for the segment. MPZZF is currently in a net cash position with $160 million in cash and $132 million in long-term debt as of Q2.

Compared to the second quarter of last year, revenues and earnings decreased by 32 and 40%, respectively. This decline is to be expected given the company’s focus on earnings visibility through longer term charters. Consider HARPEX in the last three years:

In 2023, it exited the historically high market rates of 2021-22, while in early 2024, it offered comparably lower rates seen in 2023.

It is now able to re-contract under favorable market conditions. MPZZF also reports that contract durations have become longer. From his Q2 presentation:

While it managed to contract for around 9-11 months in early 2023, MPZZF has signed contracts lasting over 20 months in 2024. The rates are also attractive. This strategy execution provides excellent dividend safety in 2025 and 2026.

Combined with the underinvestment in the feeder segment in which MPZZF operates, this company is a vehicle for exposure to a sometimes forgotten part of the global logistics supply chain: feeders. Its shareholder-friendly communication and capital return policy make it well suited for dividend investors. This segment will reach the end of the cycle later and I rate it as a buy.

Brief overview of the company

Incorporated in 2017, MPC Container Ships is an Oslo Stock Exchange-listed tonnage provider domiciled in Norway in the intraregional and regional (supply) container segments.

It owns and operates a fleet of 59 vessels ranging in size from 1,200 to 5,500 TEU. In 2024, MPZZF sold a capacity of 11,600 TEU, with a TEU-weighted age of 17.2 years. During the same period, it acquired 7,000 TEU capacity (average age 15 years) and a 1,300 TEU newbuild scheduled for delivery in 2026. These transactions helped reduce the average age of its fleet to 13.9 years.

risks

MPZZF trades in NOK on the Oslo Stock Exchange, a relatively illiquid currency on a smaller exchange. MPZZF is domiciled in Norway and withholding taxes may apply. The Tax Administration has more information.

ASSESSMENT

Using its latest published sales and purchases, we estimate the value of the MPZZF fleet to be $975 million. This would give the following NAV calculation as of Q2:

This calculation could indicate that MPZZF is trading slightly below NAV.

Market Outlook

Request tons of mercy: The Red Sea could be challenging for years

The diversion from the shorter Red Sea route is a fundamental driver of tonne-mile demand due to the much longer alternative route around the Cape of Good Hope.

The Houthis have expressed support for Palestine in the Israel/Gaza conflict, and some say the Houthis are an Iranian proxy. This article argues that Houthi motivations extend beyond ideological alignment with Iran and Palestine and may be based on the belief that attacks will bring benefits.

TradeWinds spoke to a think tank which warned that “these attacks have started to acquire their own momentum as time goes on” and said that a ceasefire in the Israel/Gaza conflict is no guarantee that the Red Sea will be safe .

The attacks showed that an actor can pose a significant threat with relative ease and low investment. Efforts by the powerful US and UK navies have proven inadequate to ward off this threat, leading instead to tit-for-tat exchanges with the Houthis.

While a ceasefire is probably the best chance to ensure that shipping can return to the Red Sea (and thereby significantly shorten routes), I don’t think it’s possible in the short to medium term.

De-globalization: more ports, more routes—more feeders

The FT writes a series on “the causes and consequences of this new era of greater state intervention in the economy”, in a world where “globalisation (is) in retreat”. This article discusses how China is responding to tariffs on US and UK products by investing in “connector countries” such as Vietnam, Mexico, Hungary, Ireland and Singapore. The goal is to avoid the tariffs by shifting their supply chains to countries unaffected by the tariffs. This is just one example of how the world is gradually moving away from China as the main manufacturing center.

Liner Business Models: The Maersk-Hapag Gemini Cooperation

Since large ships are the most important customers of MPZZF and its colleagues, we need to look at what is happening in that space. From February 2025, Maersk and Hapag-Lloyd will conduct their business as Gemini Cooperation. This newly formed alliance aims to drive a hub-and-spoke network with “industry-leading reliability.” According to MPZZF CEO Constantin Baack, who spoke about this alliance in the latest earnings call, it will benefit a feeder tonnage supplier like himself.

A review by Seatrade Maritime recently looked at direct port calls versus the hub and spoke approach. His findings suggest that

that hub-and-spoke models do not predominate; instead, there is a shift towards direct services as they often use smaller vessels, providing a more resilient option compared to the larger vessels typically associated with hub-and-spoke networks.

This shift to smaller vessels benefits MPZZF by focusing on smaller segments.

From MPZZF’s point of view, the new alliance and the move to direct services is diversifying its customer base. Two of its most important customers, Maersk and Hapag, have entered a new operating model, while others, such as MSC, continue as before. Regardless of the success or failure of the Gemini Collaboration – it has set very ambitious 90% reliability goals – MPZZF will have customers using different operating models.

Order book skewed toward larger ships — Aging feeders

MPZZF presents two slides in its earnings presentation that explain this issue well. Of the 6.8 million TEUs in the order book, only 10% are vessels smaller than 6,000 TEUs:

At the ongoing SMM in Hamburg, new build prices were discussed in a session hosted by TradeWinds. The CEO of MPZZF commented that they have an investment case for the modernization of vessels up to 1,700 TEU. This shows how new build prices and long delivery times are affecting orders.

Turning our attention to the age of vessels on the water, we note that the MPZZF segments are characterized by aging vessels. Nearly 900 ships on the water are twenty years old or older, but only 236 ships are on the order book in those segments.

This point is explored further in this July 1 article on Seatrade Maritime.

These old vessels will become candidates for scrapping as emissions requirements gradually become more stringent over the next few years and customers seek to decarbonize their supply chains. This gives MPZZF an advantage in the future.

Finally, the overall order book has also declined relative to waterborne tonnage over the past year. From a record high of 29.6% in 2024, the ratio fell to 19.2%. From the MPZZF earnings report:

Conclusion

This article looked at container feeder tonnage provider MPC Container Ships and considered its feasibility as an investment for exposure to that segment. It found that MPC Container’s strong balance sheet and earnings visibility provide some insulation from the volatile market in which it operates. It currently appears to be trading slightly below NAV. However, due to the volatile nature of transportation, investors should be prepared for changes in value.

Editor’s Note: This article discusses one or more securities that are not traded on a major US exchange. Please be aware of the risks associated with these stocks.