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Analysts: Chase Spirito cspirito@smu.edu Kent Sowell ksowell@smu.edu

Top Tankers NASDAQ: TOPT

Industrial Sector Marine Shipping

Industry favorite in growth Young, but capable management Strong demand for crude oil and

petroleum products worldwide ensures maximum fleet utilization

Entire fleet is comprised of double-hulled ships, a requirement of all oil tankers by 2015

TOPT has entered into a five-year profit-sharing employment agreement with Glencore SA, one of the world's largest oil traders

Recently acquired 4 Suezmax tankers to be delivered by early December, 2005, financed with the Company's cash reserves and secured bank credit lines

Date of valuation 11/28/05 Market Cap (millions) 364.82 52-week high 24.14 52-week low 12.50 Beta 2.139 Current Market Price per share: $13.02

Recommendation: Hold

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Company Profile:

TOP Tankers is looking to rise through the ranks of the world's shipping companies. Operating a fleet of 12 double-hull Handymax tankers and 15 double-hull Suezmax tankers, Top Tankers transports refined petroleum products and crude oil on a time charter and spot charter basis for oil companies and oil traders. Eighteen of the Company's 27 tankers are be on time charter contracts with an average term of over three years with all but one of the time charters including profit sharing agreements. Founded in 2000 by its young CEO Evangelos Pistiolis, Top Tankers experienced exponential growth after purchasing eight Handymax and two Suezmax tankers with proceeds from the company's 2004 IPO. TOP Tankers' customers include Vitol (29% of revenue) and Glencore SA (15%). (Hoover’s)

Management:

Title Name Age

Chairman Thomas F. Jackson 56

President, CEO, and Director Evangelos J. Pistiolis 32

CFO and Director Stamatios N. Tsantanis 33

CTO, TOP Tanker Management George Goumopoulos

Secretary Eirini Alexandropoulou

EVP and Director Vangelis G. Ikonomou 40

COO, TOP Tanker Management Stavros Emmanuel 63

We are confident in the management team, despite the young age of its members. Each member of the team began their careers in the shipping industry in some capacity ranging from investment banking to serving in the Greek navy. In addition, each member has management experience with a variety of shipping companies in Europe and the United States allowing each of them to contribute to successful operations of Top Tankers. Performance: Purchased last year on 3/24, TOPT was added to the portfolio as a short-term play on the imbalance on demand for tankers and supply. Last year’s analysts recommended holding TOPT for only 8-12 months, as we are in the 8th month, it is apparent that the bet has not yet played out.

TOPT $13.02 -$0.08 -0.61% 5000.000 $18.110 $65,100.00 -$25,450.00 -28.11% 11/28/2005 3:59pm

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Comparables Top Tankers is not “best of breed” relative to its peers. However, is the firm with the greatest potential for growth in the next 5 years (based on historical numbers). During the course of 2005, TOPT has moved with its peer group, suggesting that the industry’s underperformance this year is due to macro economic factors. Many in TOPT’s peer group have instituted share buybacks, which the CEO has considered dependent of course on what is available to buy and where the stock price is. TOPT FRO TK TNP Industry

Market Cap: 364.82M 3.03B 3.11B 729.89M 480.28M

Employees: N/A 40 5,500 N/A 490

Qtrly Rev Growth (yoy): 139.30% -28.90% -18.30% -11.10% 23.00%

Revenue (ttm): 201.40M 1.72B 2.09B 300.20M 286.07M

Gross Margin (ttm): 63.52% 69.13% 47.11% 59.77% 47.11%

EBITDA (ttm): 111.34M 1.24B 813.58M 155.39M 99.22M

Oper Margins (ttm): 32.18% 59.76% 29.16% 39.95% 25.17%

Net Income (ttm): 59.94M 850.40M 650.85M 155.19M 62.51M

EPS (ttm): 2.221 13.104 7.529 7.738 2.44

P/E (ttm): 5.86 3.11 5.48 4.80 8.23

PEG (5 yr expected): N/A N/A N/A N/A 1.72

P/S (ttm): 1.82 1.82 1.55 2.47 2.05

FRO = Frontline Ltd.

TK = Teekay Shipping Corp.

TNP = Tsakos Energy Navigation Ltd.

Industry = Shipping

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Growth TOP Tankers Frontline Teekay

Tsakos Energy Navigation

Industry2 Market3

12-Month Revenue Growth 638.5% 22.4% 7.3% 23.9% 11.4% 20.7%

12-Month Net Income Growth 3,531.3% 112.8% 171.4% 88.2% 77.2% 37.7%

12-Month EPS Growth 966.7% 110.1% 166.5% 66.1% 39.9% 31.0%

12-Month Dividend Growth -- 267.6% (16.0%) 65.0% 328.0% 34.1%

36-Month Revenue Growth 117.2% 63.1% 48.1% -- 15.5% 11.0%

36-Month Net Income Growth 318.0% 281.8% 117.2% -- 99.9% 69.8%

36-Month EPS Growth 205.5% 269.1% 111.1% -- 80.4% 68.9%

36-Month Dividend Growth -- 211.1% (2.4%) -- 77.6% 8.6%

Key Statistics:

Market Cap (intraday): 364.82M

Enterprise Value (29-Nov-05)3: 646.32M

Trailing P/E (ttm, intraday): 5.86

Forward P/E (fye 31-Dec-06) 1: 6.11

PEG Ratio (5 yr expected): N/A

Price/Sales (ttm): 1.82

Price/Book (mrq): 1.06

Enterprise Value/Revenue (ttm)3: 3.21

Enterprise Value/EBITDA (ttm)3: 5.805

Bet:

TOPT with a low P/E and high dividend yield of 6.4% makes it a definite value play. Furthermore, TOPT’s management is capable of making the coming quarter’s earnings estimates and improving EPS. Stamatis Tsantanis, CFO, commented during their Q3 earnings conference call, “we have secured approximately 66% of our estimated operating days with long-term employment contracts. At the same time, the nine Suezmaxes operating in the spot market,

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together with the profit sharing component of the time charter contracts, expose approximately 64% of the company's estimated operating days for '06 to potentially higher spot rates.” We feel that TOPT should be held at least until Q1 ’06, at that time we should reevaluate TOPT’s position relative to its competitors and its growth prospects. Frankly, the upside in holding TOPT for another 4 months outweighs a sell recommendation now.

Financials:

Income Statement Dec 04 Dec 03 Dec 02

Revenue 93.8 23.1 11.4

Cost of Goods Sold 33.0 14.4 7.9 Gross Profit 60.8 8.7 3.5

Gross Profit Margin 64.8% 37.7% 30.7% SG&A Expense 8.6 1.8 0.8

Depreciation & Amortization 15.4 4.3 2.6 Operating Income 36.8 2.6 0.1

Operating Margin 39.2% 11.3% 0.9% Nonoperating Income 0.5 0.3 0.8

Nonoperating Expenses 5.2 1.2 0.8 Income Before Taxes 32.7 1.7 0.1

Income Taxes 0.0 0.0 0.0 Net Income After Taxes 32.7 1.7 0.1

Continuing Operations 32.8 1.6 0.2

Discontinued Operations 0.0 0.0 0.0

Total Operations 32.8 1.6 0.2 Total Net Income 32.8 1.6 0.2

Net Profit Margin 35.0% 6.9% 1.8%

Diluted EPS from Continuing Operations ($) 2.54 0.27 0.03

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Diluted EPS from Discontinued Operations ($) 0.00 0.00 0.00 Diluted EPS from Total Operations ($) 2.54 0.27 0.03

Diluted EPS from Total Net Income ($) 2.54 0.27 0.03 Dividends per Share 0.00 0.00 0.00

Balance Sheet Dec 04 Dec 03 Dec 02

Assets

Current Assets Cash 114.8 2.3 0.1

Net Receivables 20.0 0.8 0.1 Inventories 3.2 0.5 0.3

Other Current Assets 3.1 1.2 0.4 Total Current Assets 141.1 4.9 0.8

Net Fixed Assets 382.1 48.1 32.1 Other Noncurrent Assets 16.7 3.0 0.7

Total Assets 539.9 55.9 33.6

Liabilities and Shareholders' Equity Current Liabilities

Accounts Payable 10.4 3.0 1.1 Short-Term Debt 19.5 4.1 2.6

Other Current Liabilities 12.9 2.0 0.7 Total Current Liabilities 42.8 9.1 4.4

Long-Term Debt 175.3 30.5 20.5 Other Noncurrent Liabilities 0.0 0.0 0.0

Total Liabilities 218.1 39.6 24.9

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Shareholders' Equity Preferred Stock Equity 0.0 0.0 0.0

Common Stock Equity 321.8 16.3 8.8 Total Equity 321.8 16.3 8.8

Shares Outstanding (mil.) 27.8 6.0 6.0

Cash Flow Statement Dec 04 Dec 03 Dec 02

Net Operating Cash Flow 28.6 4.9 2.4 Net Investing Cash Flow (344.9) (20.0) (18.3)

Net Financing Cash Flow 428.7 17.3 14.2 Net Change in Cash 112.4 2.2 (1.7)

Depreciation & Amortization 15.4 4.3 2.6

Capital Expenditures (328.1) (19.6) (18.5) Cash Dividends Paid (2.3) (0.6) (0.8)

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