Ship Finance Intl Ltd (SFL): Transportation-Shipping

Ship Finance International Limited (Ship Finance) is a shipping company that is engaged primarily in the ownership and operation of vessels and offshore related assets. The Company is also involved in the charter, purchase and sale of assets. Ship Finance operates through subsidiaries and partnerships located in Bermuda, Cyprus,Isle of Man, Liberia,Norway, Delaware and Singapore.

As of December 31, 2006, the Company’s assets consists of 35 oil tankers, eight oil bulk ores (OBOs) configured to carry drybulk cargo, and one drybulk carrier aggregating 10.7 million deadweight ton (dwt), seven container vessels aggregating 17,520 twenty foot equivalent units (TEUs), and one jack-up drilling rig.

Fundamentals: The stocks is up 11%
YTD and 35% YoY, however in the last -3% in the last 4 weeks. With a beta of
one this stock generally acts in tandem with the market. Versus the S&P
Index the stock is up 2% YTD.

What
makes this stock attractive is its Dividend Yield of 8.3%. The high Dividend
Yield should give stock strong downside resistance price levels.

The
fact that they are straight leasing company has boosted their ROA and ROE well
over that of industry peers. SFL’s Rate of return on assets of 7.75 vs. the
industries 7.22% and their return on equity is 33.18 vs. an industry rate of
return on equity of 15.69%.

On
August 8th JP Morgan analyst Jonathan Chappell lowered earnings forecasts
for 07’ and 08’ to reflect a higher interest expense run rate, however they
reiterated their overweight rating. In the 2Q their operating income of 66.2
million beat analysts expectations by 10 million.

SFL
plans to commit another 855 million in 2H 07’ and 08’ to expansion of their
fleet.

Valuation:
According to the August
22nd JP Morgan report, SFL trades at 16.2 times the 2008 eps
estimate or at a 14% discount to their peer group. The fixed dividend yield of
8% is to remain in place through 2010 according SFL. Also SFL’s fixed-rate
contract coverage provides will help minimize exposure to the highly volatile crude
oil tanker spot market in 2008.The downside risk is minimal compared the rest
of the industry that does not have these type guarantees.