A new article in Market Realist this month stated that dry bulk shipping is gaining traction again, thanks to the recent rise in value of 10-year-old Panamax and Capesize ships. Panamax vessels have gone from a value of $22 million in February to $22.5 million in March, and Capesize from $35 million to $38 million.
The article author, analyst Xun Yao Chen, says that this increase will likely result in dry bulk pricing increase:
“Investors should know that secondhand vessel values are used by analysts to value dry bulk shipping companies in the stock market…the higher the value of assets, the higher the value of a company’s assets.”
The last time we covered dry bulk shipping companies, stocks were soaring as we headed into a new year. Since then, the market lost steam, though many are claiming it has “bottomed out” and we should now expect price increases.
Here are some small cap dry bulk shipping companies we’ve been following. Though the market is currently down, could this be time for value-seeking investors to get a good deal within the industry?
Safe Bulkers, Inc. (NYSE:SB), is an Athens, Greece-based international company that provides marine dry bulk transportation services. They currently own 30 vessels with an average age of 5.4 years including Panamax, Kamsarmax, Post-Panamax and Capesize class. As of April 21, TheStreet.com reported that American global investment bank and institutional securities firm Jeffries had upgraded SB from “hold” to “buy,” with an $11 price target as they capitalize on newbuild vessels. SB closed April 28th at $7.97, down $0.23, with a market cap of $662.49 million. Its 52 week trading range is $4.78 – $11.48.
Athens-based Paragon Shipping Inc * (NYSE:PRGN) is an international shipping company that currently has a fleet of 14 dry bulk vessels and a newbuilding program that includes two Ultramax dry bulk vessels and a 4,800 TEU containership to be delivered this year, and two Ultramax vessels and three Kamsarmax vessels to be delivered next year. Two of these ships, the Ultramax vessels, were recently announced along with $120 million in financing to secure up to 60 percent of the market value of the ships. PRGN closed April 28th at $5.67, down $0.60, with a market cap of $59.30 million. Its 52 week trading range is $3.75 – $9.40.
Also in Athens is Star Bulk Carriers Corp.(NASDAQ:SBLK), with a fleet of 17 dry bulk carriers including five Capesize, two Post-Panamax, two Ultramax and eight Supramax and an average age of 8.9 years. SBLK also provides vessel management services to 14 third-party dry bulk vessels. They are in agreement to construct 11 fuel-efficient newbuild dry bulk vessels with expected completion between 2015 and 2016. SBLK closed April 28th at $11.82, down $0.25, with a market cap of $335.06 million. Its 52-week trading range is $5.28 – $15.88.
Navios Maritime Holdings Inc. (NYSE:NM) is a company offering worldwide carriage, trading, logistics, and storage for international bulk cargo, and has been in operation for almost 60 years. They also own and operate one of the largest bulk terminals in Uruguay and one of the largest liquid ports in Paraguay. NM owns more than 30 vessels of Ultra-Handymax, Panamax, and Capesize class, and long-term charters 18 ships of the same classes as well as one Handysize. They have two more to be delivered, an Ultra-Handymax set for 2015 and a Capesize in 2016. NM closed April 28th at $7.77, down $0.48, with a market cap of $785.64 million. Its 52-week trading range is $4.36 – $12.12.
MIDF Research reported on April 18th that the “worst is over for the dry bulk shipping sector.” According to the report from Hellenic Shipping News, “fundamentals have improved, supported by better global economic conditions as well as the rollout of railway projects in China” and “tonnage demand for dry bulk shipping grew by 7% year-on-year in the first quarter of 2014, outpacing the growth of the global fleet supply of 5%.” Investors looking for top small cap stocks may wish to further explore the dry bulk shipping industry as it makes its way out of this slump.
* Denotes a client of Allen & Caron Inc., publisher of this blog