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Star Bulk Carriers Corp. (SBLK)
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Summary Slide from the Safebulker (SB) earnings call yesterday applies to all the drybulker owners. SB is one of the few US listed bulkers that has a substantial new build order (8) for 2022, 2023, 2024 delivery
• Minimal orderbook lowest since 2002 as decarbonization discussions not favor orders;
• Shipyards preoccupied with containers and tankers orders until 2024;
• Only a handful of shipyards have developed new environmental efficient designs for
• Exceptionally strong start of 2021 with robust volumes of Iron Ore, Coal and Grain trade;
• Demand for commodities is very strong;
• Increased Governments stimulus programs spending both in east and west;
• “Greening” of global economy;
• Brent prices recovery may lead to even wider Hi5 spread differential;
• Ageing fleet and enhanced environmental restrictions may increase scrapping;
As an example of share prices NOT following huge earnings and rise in vessel asset prices, look at such container shipping stocks as CMRE and CPLP.
The container shipping rates have risen 400% in a year, the container ships of 10–yr now price higher than their newbuild equivalent.
Yet, their share prices haven’t greatly moved in proportion.
It might be that the large order book for container ships is causing folks to shy among from those stocks.
And maybe that is what will differentiate dry bulk from containers.
But my hunch is that if dry bulk rates increase materially from here (already high historically), then ordering for new dry bulk vessels will follow.
That too will eventually cap dry bulk equities.
The other distinction may be div payout from dry bulk companies, like SBLK, GOGL, and GNK. If their earnings hold for the next 18 month period, the div payout will be 40-50% current market price - something not occurring among the container shippers.
All Drybulk classes, according to Jefferies statement today, are earning about the same - low $30,000s/day.
That is quite rare, with size typically dictating charter rate. So,historically Capes earn double Panaclass, for instance.
Since almost 70% of SBLK fleet is the Pana/Supra class, those vessels are earning the equivalent as if Capes were trading in the $60K/day range.
That just puts in perspective the remarkable earnings that SBLK is generating at this time with their smaller vessel classes.
Deutsche Bank predicting 'at least 60c' dividend in 2Q (and more in 3Q).
That number assumes $22k per day average rates, which generates ~120mm of cash less working capital drag of $20mm and balance sheet cash (per dividend policy) which leaves ~$65mm available for the dividend.
They maintain a $40 price target.
ATHENS, Greece, July 21, 2021 (GLOBE NEWSWIRE) -- Star Bulk Carriers Corp. (the "Company" or "Star Bulk") (Nasdaq: SBLK), today announced that it will release its results for the second quarter and half year ended June 30, 2021 after the market closes in New York on Thursday, August 5 2021. Star Bulk's management team will host a conference call to discuss the Company's financial results on Friday, August 6, 2021 at 11:00 a.m. Eastern Time (ET).
Baltic Dry Index +1.90% at 3,214
Capesize Index +5.60% to $33,639
Not much has changed in dry bulk the last 2 weeks, over which SBLK shares are off about 25%.
Rates are strong. BDI remains near 3000, an almost decade high. Little newbuild ordering, and lowest backlog on record.
Bulk vessel values are climbing, and gradually clawing to levels that are more
Consistent with vessel earnings,
Major players like are seeing the investment value in this sector, whether Fidelity large stake in dry bulk, to the new venture in dry bulk by shipping magnate Tor Olav, or that a major container shipper (CMRE) has elected to buy second hand bunkers for best growth opportunities in shipping - now having accumulated 28 Handy and Pana class ships.
And, by all present indications, SBLK will pay a roughly 0.70/sh div for Q2, and likely larger payout in Q3. Q4, if FFAs are any indication, would see yet a greater distribution. So, sharing the wealth with shareholders was not a one-off in Q1, or a brief occurrence in 1H2021 - it is like
Y to have appreciable legs. Some estimates indicate that 2021 and 2022 could see, combined, $8 - $10/sh payout. In other words, 50-75% total return from the div alone.
Robust commodity demand to spur dry bulk rally into Q3
in Dry Bulk Market,International Shipping News 13/07/2021
The surging demand for infrastructure-related commodities such as iron ore and coal, along with minor bulks such as aggregates, clinker, limestone is likely to help fuel the dry bulk market rally into the third quarter, with freight levels and time charter earnings setting new records.
The dry bulk market has been on a firm footing since the beginning of 2021 and market participants expect the trend to continue in the upcoming quarter.
“I expect the peak [for 2021] has not come yet as the [seasonally firmest quarter] is yet to come,” said a Capesize ship-owning source, adding that healthy demand for sub-Capesize sectors would support the Capesize rates, too.
The Platts dual Cape T4 index averaged at $30,387/day and $33,615/day in Q2, basis lower sulfur marine fuel for non-scrubber vessels and scrubber-fitted tonnage separately and registered a record high of $44,233/day and $47,433/day on May 5. Meanwhile, the APSI 5 Index averaged at $26,805/d in Q2, nearly surpassing the Panamax KMAX 9 Index at $26,946/d.
A little more color on the morning Stifel drybulk sector view...who now is using the phrase "super cycle"
July 19, 2021
▪ While the current shift away from cyclicals could last through the summer, we expect all equities in the dry bulk peer group should trade up substantially with improvements in underlying fundamentals, rates, and cash flows. The current market has all the makings of a super cycle (strong underlying commodity demand and pricing, limited near-term supply growth, structural regulatory overhang limited ship ordering, etc).
▪ All of our 2022 estimates are based on a better than average market but well below peak cycle (2004-2008). Our price targets are based on ~6x the EBITDA generation generated at those rates, but should the market move closer to previous peaks, EBITDAs could easily triple.
▪ Star Bulk Carriers (SBLK) – Largest name and also a primarily beneficiary from scrubbers as fuel margins widen. Our $38 target price is based on shares trading at 6.4x our ‘22 EV/EBITDA estimates.
Baltic Dry Index -1.37% at 3,166
Capesize Index -2.67% to $31,880
Baltic Dry Index +0.34% at 3,210
Capesize Index +0.88% to $32,755
Dry bulk ship values expected to rise considerably in 2H2021... despite strong share price action in last 9 months, considerably more ascent is expected
Home / Shipping News / Dry Bulk Market / No letup yet in dry bulk shipping’s ‘remarkable rally’
No letup yet in dry bulk shipping’s ‘remarkable rally’
in Dry Bulk Market,International Shipping News 12/07/2021
Container shipping dominates the headlines, but in its shadow, dry bulk shipping is posting its best first half in a decade. Dry bulk, which is notorious for abruptly losing momentum, is still going strong.
“This year’s remarkable rally is yet to run out of steam,” said Maritime Strategies International in its latest outlook.
“The dry cargo market has taken many by surprise. The rally continues,” said Nick Ristic, lead dry cargo analyst at Braemar ACM Shipbroking.
Rates for Capesize ships (bulkers with capacity of around 180,000 deadweight tons or DWT) rose to $33,300 per day on Monday, according to Clarksons Platou Securities. Panamaxes (65,000-90,000 DWT) were earning $32,800 per day and Supramaxes (45,000-60,000 DWT) $31,600 per day.
It is extremely rare for all three size categories to simultaneously top $30,000, as they have for the past two weeks. Panamax and Supramax rates are now at fresh highs for the year. Panamax rates are more than double their five-year average and Supramax rates are more than triple theirs.
Forward freight agreement (FFA) pricing, time-charter rates and ship valuations all point to continued strength.
FFAs traded down on Monday but remain above current spot rates for the coming quarter. According to brokerage BRS, the Capesize Q3 contract closed at $39,958 per day and the Q4 at $36,257, the Panamax Q3 at $35,800 and Q4 at $30,004, and the Supramax Q3 at $34,928 and Q4 at $29,692.
On the time-charter front, Clarksons reported that “activity remains robust, with several fixtures in the 6- to 12-month range across the various asset classes reported recently. Currently, 12-month charters are quoted at above $30,000 per day for Capes, $27,000 per day for Panamaxes and $24,000 per day for Supramaxes.
“Several Capes hovering around the 15-year-age range have been fixed on 12-month charters at above $30,000 per day recently,” said Clarksons. “This equates to an EBITDA [earnings before interest, tax, depreciation and amortization] of $9 million as compared to valuation quotes of $20.5 million for such vessels — and scrap value close to $12 million — indicating much more upside remains in secondhand values.”
Secondhand ship prices have already risen sharply. According to Braemar ACM, the price of a 5-year-old Capesize has increased 25% since December, with the price of a 10-year Cape jumping 50%. The price of a 5-year-old Supramax has risen 23%, a 10-year-old Supramax 42%.
During the Marine Money Week virtual conference last week, Aristides Pittas, CEO of EuroDry (NASDAQ: EDRY), opined, “Dry bulk [ship] prices have increased quite a lot, but they still have significant room to move upwards if the market follows anything like what we saw during the last good cycle in 2005-2007.” He predicted that ship values will rise further 20%-25% by year-end.
Martyn Wade, CEO of Grindrod Shipping (NASDAQ: GRIN), was even more bullish. He maintained that bulker values still have an additional 50%-75% to run. “With the cash being generated, five-year values are just too cheap at the moment,” Wade asserted.
Triple-digit gains for stocks
Dry bulk equities are largely a play on rebounding industrial production, infrastructure construction and the strength of the Chinese economy. U.S.-listed dry bulk stocks began their ascent in November. Even after a pullback on Monday, dry bulk stocks were up triple digits over the past eight months.
Between Nov. 2 and Monday, the stock price of EuroDry rose 614%, Safe Bulkers (NYSE: SB) 364%, Star Bulk (NYSE: SBLK) 282%, Eagle Bulk (NASDAQ: EGLE) 248%, Golden Ocean (NASDAQ: GOGL) 211%, Grindrod 190% and Genco Shipping & Trading (NYSE: GNK) 180%.
The Breakwave Dry Bulk Shipping ETF (NYSE: BDRY) — an exchange-traded fund launched in March 2018 that buys FFAs — is up 344% since November. Volumes have surged over the past three months. The ETF closed at the highest level in its history on Friday.
How long can rally last?
Pittas believes there will be “exceptionally strong demand” for iron ore and coal, together with “very promising demand” for grains and other minor dry bulks. “We have the possibility of two or three good years in dry bulk ahead of us,” he argued.
Jefferies analyst Randy Giveans highlighted the all-time-low newbuilding orderbook, at just 5.8% of on-the-water tonnage. “We believe a perfect storm of underlying supply and demand fundamentals is shaping up in the dry bulk segment, which could boost charter rates and asset values in the coming years,” Giveans said
Stifel upped their views on the drybulk sector today, and increased SBLK 2021 earnings to over $6/sh (BUY, $38/sh). They also increased Q2earnings to $1.47, from $1.16 previous. 2022 earnings mostly unchanged at this moment, slightly over $6/sh.
Buy their numbers, SBLK trades at 3x earnings, and also at a greater than 30% dividend yield.
The Good, The Bad, and The Potentially Great: 2Q21 Shipping Preview
This quarter the container market got better, but everyone knows a cliff is coming, the dry bulk market improved, and it seems like there is plenty of room for continued improvement, and the tanker market remains oversupplied and terrible although demand is gradually improving. With those dynamics, we are adjusting our numbers modestly, continuing to favor dry bulk shipping names, keeping a close eye on tanker names, and we are somewhat mixed on container names. Our top idea of the 12 traditional shipping names under coverage is Star Bulk Carriers (SBLK).
• Dry Bulk: We are in the midst of a classic imbalance of supply & demand with incremental ship supply limited by lower ordering activity over the past several years and demand for transportation being driven by strong infrastructure spending and commodity consumption.
While the summer months are typically slower, we expect the current market to remain tight but not tighten further until late 3Q. However, with virtually no excess shipping supply and seasonal and structural increases coming with respect to the number of cargoes, we do expect there should be a sharp improvement in rates into the end of the year. Furthermore, the orderbook for 2022 is the smallest it has been in nearly 20 years, so only modest levels of demand growth could keep freight rates higher or tighten them further. Consequently, with plenty of gas last left in the tank, the dry bulk segment is our favorite area for 2H21 and 2022. Also, with very little ordering of dry bulk vessels still not taking place, we are increasing our 2023 estimates modestly as it looks as though the risk of eventual oversupply is being shifted further to the right.
Dry Bulk Shipping Update (BUY) - Plenty of Dry Powder Left (24-pages)
Dry bulk shipping has skyrocketed since October, but we still see plenty of upside left. We believe that this cyclical expansionary phase could be one of the best during peacetime on our records back to 1741, spurred on by the lowest orderbook vs fleet since 1996 at least. We yet again increase our asset prices, raising NAVs and thus target prices by 22% on average. We reiterate our BUY on dry bulk shipping. Cleaves has a 36 price target on sblk
Baltic Dry Index unchanged at 3,300
Capesize Index +0.95% to $31,266
Ending the week, BDI has 5th straight weekly gain.
Spot Capes near $31K/day, Pana near $37K/day, and Supra’s near $29K/day.
Yet, SBLK stock has struggled.
Baltic main index posts fifth straight weekly rise on capesize strength
in Dry Bulk Market,International Shipping News 10/07/2021
The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry bulk commodities, posted gains for a fifth straight week on Friday as capesize rates strengthened.
The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, rose 19 points, or 0.6%, to 3,300 and was up 0.5% for the week.
The capesize index was up 86 points, or 2.4%, at 3,735, rising 6.4% since last week.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes of coal and steelmaking ingredient iron ore, increased by $712 to $30,972.
The panamax index fell 27 points, or 0.7%, to 4,101, falling for a fifth straight session.
The index was down 3.9% for the week, its first weekly decline in six.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,00 tonnes, dropped by $240 to $36,912.
The supramax index eased 6 points to 2,891.
According to Tradewinds, and a recent S&P of three modern Ultramax vessels by GNK, the market value of those vessels (about 5-yr old) has risen 50%
Genco is said to be paying around $72m for the Chinese-built trio, which TradeWinds has reported were being circulated for sale on 30 June. They are the 63,000-dwt Navigare Bellus, Navigare Beatus (both built 2017) and the Navigare Bonitas (built 2014).
Genco is said to be paying about $25m each for the two newer ships and roughly $22m for the 2014-build.
VesselsValue assigns a total worth just under $72m to the trio.
In one measure of rising values, Navigare Beatus and Navigare Bellus were sold by the former Scorpio Bulkers to Navigare last October for $17m each, an appreciation of nearly 50%.
It’s worth remembering that about 90 of their 128 fleet are Pana-class,and Supra-class.
That vessel class is seeing record spot fixtures.
The spot rates for Pana class are near $38,000/day, which is close to all time highs. SBLK has about 50 such vessels in their fleet.
Cape rates have been week of late, and that class has been the sole drag on the BDI.
The weakness in SBLK stock price seems unjustified by near record level earnings for 70% of their fleet, and very strong ($29,000/day) spot rates on Capes.
Right now, spot rates averaged for their fleet overall is above $30,000/day.
Note that their fleet avg Q1 2021 TCE was about $15,000/day, and their existing fixtures at that time for Q2 suggested TCEs about $21,000/day.
It is likely that Q3 2021 TCEs will be in the $25,000/day range.
And, if FFAs for 2H2021 are close, then Cape rates should rise about $50,000/day by Fall.
$150M ATM program...implies upto 7% additional shares could be issued, at today's pricing.
Comp[any makes clearly they have no imminent intent to sell ATM, merely that they have set up the means to do so via several brokerage houses.
The optimist in me believes that management is making a product move now establish the means, and forces the opportunity in coming quarters when the market will have further strengthened, and their share price has appreciated from the current level.
Given that container shipping company CMRE, a careful and systematic investor in shipping, has added yet another 12 bulk vessels to their fleet today, adding to the 16 initial purchase made a few weeks ago, save players are expected much better future for drybulk.
Baltic Dry Index +3.09% to 3,199
Capesize Index +7.88 to $32,469
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