We initiate coverage of Seanergy Maritime with a BUY recommendation and target price of USD 1.25.
The company has made some very attractive acquisitions at the bottom of the cycle, one example being the two 2010-built Korean Capes which have appreciated ~60% since the deal was announced six months ago.
We see recent equity issuances as accretive given the appreciation of asset prices. However, we believe a discount on the company vs peers is just given several factors; including the At-The-Market (ATM) program, recent fee structure, the class A Warrants and share illiquidity.
Valuation: Our target price of USD 1.25/sh is based on a NAV of USD 0.94/sh, but added value from the optionality of a further 10% increase in asset values which would equate to a NAV of 1.67/sh, and applying a 25% discount. The implied asset value elasticity of NAV is 79% in our calculations, which is attractive given our view of rising asset prices, but equally sensitive on the downside… We recommend the less risk averse investor to BUY the share.