Tag: ATCO

Atlas hosted its annual investor day this week. There wasn’t a whole lot of new information, but there was some refinement on various pieces that lacked clarity. For me, these were the major takeaways:

• Core containership business outlook: Plenty of growth runway both within core containership leasing and ancillary technologies supporting the core, specifically around the green transition. Not hitting wall on places to invest in and around the core.
• APR Energy
  • Purchase price was ~4x EBITDA, after purchase price adjustments were made based on lawsuit resolutions
  • Going after whitespace in green transition technologies and long term contracted infrastructure builds
  • Good management team finally in place
• Cash generation: Expect to produce $500m / yr in FCF on go forward basis and another $250m / yr after new build program is fully delivered in 2024. On ~300m shares at ~$15 / share, that’s roughly an 11% FCF yield today and ~16% by 2024.

Around the same time it was disclosed that David Sokol, the chairman of the company, was awarded a large stock grant that vests through 2027. I’m happy that there’s a solid retention incentive to keep him in his place, as he is the driving force behind the company.

Overall, while many lament the sideways share price over the past year, I’m happy to own what is effectively an infrastructure fund at a reasonable price with great management.

Disclosure: We own shares of Atlas Corporation, this isn’t investment advice. Do your own work.

Atlas had a banner 2021. They added an incredible amount of long duration contracted revenue. They were the only shipowner that undertook massive contracted new build programs. Injury rates are at industry lows. You can’t really ask more from a company that is reshaping the containership leasing business.

However what makes me most excited about the business is the culture set by David Sokol. Long term thinking. A culture of execution. A series commitment to sharp capital allocation. A focus on providing novel solutions for customers.

Most shareholders I encounter are here for the incredible spot rates that ships are leasing for today and hoping for some sort of short term action to boost the share price. Few focus on the contracted revenue that will start hitting in 2023 and 2024 or the goal setting of the organization to grow the energy business to equal or larger than the ship leasing business in 10 years.

Almost nobody focuses on the conservative and countercyclical nature of the management approach, in this case in reference to how to grow the nascent energy business:

But APR at some point will have similar opportunities and you just have to — you have to see through my experience in the last 40 years in the investing business, particularly when you’re looking for levelized business models is that things happen about every 5 to 7 years in different industries, and they provide enormous opportunity. I’ll never ever forget when Enron filed for bankruptcy. That opened up 18 months of the best investment opportunities in the energy industry. And those things –they happen in each industry and then they happen over time, you just can’t always predict them. But we’re just not going to jump into things on the come. We will get involved where we know we can develop long-term sustainable cash flows andcontinue to build the shareholder value for Atlas.

ATCO Q4-2021 Earnings Transcript

I expect an economic downturn to be kind to Atlas over a full cycle.