WATCHconviction 3published 2026-09-11

GASS — StealthGas Inc. · 2026-09-11 · Verdict: WATCH · Conviction 3

Price $9.33 (price date 2026-09-10, the screen row close; no live price used) · Shares 37.63M · Mkt cap $351M · EV $183M strict, ~$108M including the collected insurance claim and held-for-sale vessels · EV / normalised after-tax operating profit 4.8x at the desk's 25% tax convention, 3.6x at the company's actual near-zero rate · FCF yield ~22% · Net cash $168.3M at 30 Jun 2026, "over $250 million currently" per management · ADV $1.3M Sources read: 20-F filed 2026-04-28 for FY2025 (Items 3D, 4, 5, 7), 6-K 2026-06-08 (Q1 2026), 6-K 2026-09-03 (Q2/H1 2026, the desk's transcript substitute), 6-K 2026-08-28 (2026 AGM notice), Form 4s (12m), universe_v2.csv row.

Desk stats

1. What the business does

StealthGas owns 26 LPG carriers in the water including one 51%-owned JV vessel, 288,542 cbm (6-K 2026-09-03): mostly small fully-pressurised ships of 3,500 to 11,000 cbm, plus four handysize and three medium gas carriers. It has no employees. Stealth Maritime, controlled by Vafias family members other than the CEO, supplies all technical and commercial services for $440 per vessel per day, 1.25% of gross freight and hire, and 1% of any vessel bought or sold (20-F, Item 4). About 60% of remaining 2026 fleet days are on period charters.

2. Why it is mispriced: the edge case

The balance sheet changed after the last audited filing. The Eco Wizard, the newest and largest ship, was damaged by two explosions at Ust-Luga, Russia in July 2025 and has not traded since (20-F, Item 3D). The insurance claim sat as a $64.2M receivable at 30 Jun 2026; management says it has settled, lifting liquidity from $168.3M to "over $250 million currently" (6-K 2026-09-03). That is about $6.64 a share of cash against a $9.33 price and $19.32 of book. Screens still read a Dec-2025 balance sheet with $99M of cash, because a foreign private issuer's 6-K interims carry no tagged data.

The honest half: this is not only a data lag. No dividend since Q1 2009 (20-F, Item 3D). Only $8.8M of a $30M repurchase authorisation remained at 1 April 2026 and nothing was repurchased in H1 2026 with the stock at half of book (6-K 2026-09-03 cash flow statement). Harry Vafias beneficially owns 33.0% and four holders control about 59% of the register (20-F, Item 7). Nobody is a forced seller; the discount is what minorities charge for cash they cannot reach.

3. Unit economics

Daily vessel operating expenses were $5,200 in FY2025 against a $15,022 TCE, a spread stable for three years (20-F, Item 5). H1 2026 net income $33.2M and EPS $0.89, versus $34.5M and $0.93; Q2 net income $17.3M on $42.9M of revenue, a 40% margin with zero interest expense. Pressure points: H1 voyage expenses rose to $13.4M from $9.5M on war-risk premiums and spot days, and drydocking tripled to $3.0M on three vessels. Three largest customers were 34.1% of FY2025 revenue.

4. Balance sheet and capital allocation

Zero debt, $168.3M of cash and short-term investments, $473.3M of vessels, $726.8M of equity. The 20-F's own sensitivity table says only 4 of 28 vessels carried above charter-free market value at 31 Dec 2025, by $4.6M in aggregate, so book is a defensible NAV proxy. Share count drifts up, not down: 36.4M to 36.7M weighted average across H1 2026 as options struck at $6.01 and $6.43 were exercised, with no offsetting repurchase.

5. Management: said vs did

The CEO's Q2 comment is the thesis in one sentence: "our attention turns to the optimal utilization of our growing liquidity that has reached an all-time high of over $250 million currently" (6-K 2026-09-03). In the same six months they bought back nothing at $9 against $19 of book and let the authorisation run down to $8.8M. The only Form 4 activity in twelve months is option exercises and a gift; no open-market insider purchase.

6. Valuation

Reverse DCF: at $9.33, crediting the stated $250M of liquidity at par, the market pays about $101M for a debt-free 25-ship fleet that produced roughly $50M of normalised operating profit over the last twelve months and carries $473M of book value, which implies either that charter rates fall by about two thirds and stay there, or that a minority holder never sees the cash. - Bear (35%, ~$9). Rates revert to the nine-year average used in the company's own impairment test, 17% below 2025 realised rates (20-F, Item 5E). Operating profit roughly halves to $25M, cash keeps piling up undistributed, the discount holds at 0.45x book. - Base (45%, ~$12). Rates hold, the fleet earns $60-66M a year, book compounds toward $21, the multiple drifts to 0.55-0.6x book. - Bull (20%, ~$16.50). The board acts on its own words: $100M of buyback at $10 retires 27% of the shares, or a dividend returns after seventeen years. Re-rate to 0.8x book. Probability-weighted about $11.85, roughly 27% above the price, with the whole spread set by capital allocation rather than by shipping.

7. Catalysts

Q3 2026 results (roughly December) should show the insurance proceeds on the balance sheet and are the first natural point for a distribution. The 9 October 2026 AGM carries only a director election and auditor ratification (6-K 2026-08-28). Delivery of the Eco Royalty sale in Q3 adds cash.

8. Risks and pre-registered kill criteria

Geopolitical exposure is live: the Eco Oracle still could not exit the Persian Gulf at the 20-F date because of the closure of the Strait of Hormuz. The cash pile itself raises PFIC risk for US holders, since assets held pending investment in vessels count as passive (20-F, Item 3D). 1. No dividend declared and no repurchase authorisation above $50M announced by the FY2026 results release, expected around April 2027. 2. Average daily TCE below $13,000 for two consecutive quarters, against $15,709 in Q2 2026. 3. Fleet operational utilisation below 85% for two consecutive quarters, against 82.3% in Q2 2026 and about 90% in Q1. 4. A vessel purchase from a Vafias-affiliated entity above $50M, or any issuance or spin-off that cuts cash per share.

9. Verdict and summary

WATCH, conviction 3. StealthGas is a debt-free owner of 26 small LPG carriers trading at $9.33 against $19.32 of book and roughly $6.64 a share of cash after management collected the insurance settlement on the ship that exploded in a Russian port, so the market is paying about $101M for a fleet that earned roughly $50M of normalised, essentially untaxed operating profit in the last twelve months. Every operating number checks out: no debt, 40% net margins, stable TCE rates, and the company's own impairment disclosure puts the vessels at about fair value. The reason it is cheap is governance, not accounting: no dividend since 2009, zero buybacks in H1 2026 with the stock at half of book and an authorisation still open, a related-party manager owned by the controlling family, and a CEO who owns 33% and has twice spun subsidiaries out to Nasdaq. Screens still read a Dec-2025 balance sheet showing $99M of cash rather than $250M, which is the mispricing, but a discount on cash a minority holder cannot reach is rational. Buy the disclosure, not yet the stock: this becomes an IDEA the day the board announces a distribution or a repurchase sized against $250M rather than $8.8M.

Research for discussion, not investment advice. Positions and sizing are the reader's decision.

Source markdown: 2026-09-11_GASS.md · how these notes are built · every verdict tracked since publication.

Research and education only. Nothing here is investment advice or a recommendation to buy or sell any security. No price targets are recommendations; positions and sizing are the reader's decision. Past performance does not predict future results.