TOP SHIPS Inc (NASDAQ:TOPS) Might be Just Too Top Heavy

TOP SHIPS Inc (NASDAQ:TOPS) Might be Just Too Top Heavy

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TOP SHIPS Inc (NASDAQ:TOPS) has slumped over the last year, but the stock has regained some major momentum of late. The microcap nautical transportation provider is seeing a 30% crest from last week but there might be dilution ahead for TOPS after some recent acquisitions plus a few other factors.

The overall factors to note for TOPS ahead are: the acquisition of two new build Suezmaxes and one MR in its year end earnings release, the Second Purchase Agreement for Crede has $8.4 million of equity issuance remaining as of February 21 and share count will increase 40% to complete it, and upcoming expiration of listing deficiency cure period will require a reverse split by April. Another factor here is the recent time extension for four vessels whose total gross revenue backlog equals $27.4M

 TOP SHIPS Inc (NASDAQ:TOPS) is an international provider of oil, petroleum products and chemicals transportation services. The Company owns and operates eco medium range (MR) tanker vessels focusing on the transportation of crude oil, petroleum products (clean and dirty) and bulk liquid chemicals. The Company’s fleet includes over two chartered-in 50,000 deadweight ton (dwt) product/chemical tankers vessels, the Motor Tanker (M/T) Stenaweco Energy and the M/T Stenaweco Evolution; approximately two 39,000 dwt product/chemical tankers vessels, the M/T Eco Fleet and the M/T Eco Revolution, and over two 50,000 dwt product/chemical tankers scheduled for delivery from Hyundai Dockyard. Its newbuilding fleet consists of Hull No S414 (tbn M/T Stenaweco Excellence) and Hull No S417 (tbn M/T Nord Valiant). The Company’s subsidiaries include Ocean Holdings Inc., Top Tanker Management Inc. and Lyndon International Co.

Evangelos Pistiolis, President and CEO of TOPS, stated: “The total gross revenue backlog for the fixed charter period of all of the Company’s operating fleet stands at about $131 million and when adding the 50% of our joint venture vessels it increases to about $147 million, with cashflow visibility reaching into 2021. Our business strategy continues to be focused on further expanding our fleet as it is important that we achieve a certain critical mass in terms of fleet size with an aim to maximize our operational efficiencies and synergies.”

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In addition, TOPS’s debt levels surged from US$84.54M to US$103.95M over the last 12 months – this includes both the current and long-term debt. With this increase in debt, the current cash and short-term investment levels stands at US$24.08M, ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful, though these low levels of cash means that operational efficiency is worth a look.

With a debt-to-equity ratio of 96.90%, TOPS can be considered as an above-average leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since TOPS is presently unprofitable, sustainability of its current state of operations becomes a concern.

TOP SHIPS Inc (NASDAQ:TOPS) has a market cap of 27.67M with a float of 21.26M. The 10 day average volume is at 12.66M but if there is enough upside here to invest remains to be seen. TOPS is still unprofitable and needs to shore up there balance sheet before they can really start to string solid runs together. Sign-up for continuing coverage on shares of $TOPS stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $TOPS, either long or short, and we have not been compensated for this article.

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