A fundamental valuation of MPC Container Ships as of January 3rd, 2022
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The valuation in this thesis deals with a fundamental valuation of MPC Container Ships as of3 January 2022. In addition, a relative valuation is also included.The first part consists of introducing MPC Container Ships, the shipping industry, and theircompetitors. Although MPC operates in a competitive market, they have experienced rapidgrowth in revenues after the Covid-19 pandemic. Section 4 elaborates on valuation theory andargumentation for the choice of valuation method. A combination of the discounted cash flowand relative valuation have been conducted. Furthermore, a strategic analysis follows in section5, which indicates the company's competitiveness based on internal and external factors.Findings of the analysis shows that MPC operates in a market with a high competition,indicating that the shipping industry has more newcomers as the industry is profitable. In section 6, the financial statements of MPC Container Ships are presented, followed by a riskanalysis in section 7 that addresses short-term and long-term payment capabilities. MPC has astrong balance sheet, and the liquidity and solvency risk are low. As a result of the strategicanalysis and analysis of the financial statements, future cash flows are estimated and presentedtogether with an explanation. Furthermore, in section 8 and 9, future cash flows were discountedwith a weighted average cost of capital to calculate the value of the equity of MPC ContainerShips. Next, in section 10 the terminal value along with that first value estimate is presented.In section 11, a relative valuation is performed to support the result from the discounted cashflow. Finally, a conclusion is presented based on the value estimate received from the discountedcash flow and relative valuation, followed by a trading recommendation. As of 3 January 2022,the market price of MPC stocks was NOK 25.95. The discounted cash flow and the relativevaluation conducted in this thesis, resulted in a fair value of NOK 38.33 and NOK 36.88. Ourestimated fair value of the stock is therefore approximately 40 percent above the market price.Based on the market outlooks and estimated stock price, our recommendation is to buy thestock of MPC Container Ships.