Navigator Holdings (NVGS)

Navigator Holdings (NVGS, $19.13) is in the liquefied petroleum gas (LPG) shipping industry. The liquids they ship are by-products of oil and gas production and refining. Their stock appears fairly valued based on the current industry dynamics, but the LPG shipping industry is expanding rapidly over the next few years. I believe the market is underestimating how much cash Navigator will generate in 2017 forward which creates a significant opportunity for investors willing to hold NVGS that long.

Business overview

Navigator operates a fleet of 28 liquefied gas carriers (plus 10 more ships to be delivered through 2017). A liquefied gas carrier is a generic term for a vessel that carries LPGs (such as propane and butane), petrochemical gases (such as ethylene, propylene and butadiene) and ammonia. Collectively I’ll refer to these liquefied gases as natural gas liquids (NGLs). Navigator currently only owns medium-sized (i.e. handysize) vessels, though they are getting into larger ships in the future. Handysize vessels are great because they can handle both medium and long distance routes and are able to access all ports unlike very large gas carriers (VLGCs). Both the liquefied gas carrier industry as a whole and the handysize niche within it are very fragmented. Navigator’s 26% market share in the handysize market is far ahead of their second largest competitor, Ultragas, with 10% of the market.
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