HUNT-US: Initiation (Neutral, TP 9.2)

The company recently concluded its inaugural vessels acquisition, purchasing five Capesize vessels (built 2010/11) at an en-bloc consideration of USD 139m (accretive vs our valuation of USD 156m). We expect positive momentum from further fleet growth, increased analyst/investor focus and eventually improved share liquidity. However, this is offset by the current dilutive share class structure. Thus, we initiate coverage of Hunter Maritime Acquisition with a Neutral recommendation and target price of USD 9.2.

Capital structure: The company was founded in 2h16, initially with 4,312,500 Class B shares at USD 0.0058/sh. Since its inception, 15,173,100 Class A shares have been issued at USD 10.0/sh, in addition to 10,942,963 warrants issued with a strike we understand to be USD 11.50/sh. The Class B shares (reduced to 3,793,275) will be converted into Class A shares after the closure of the ongoing purchase transaction (we expect around mid/late May), and will constitute 20% of shares outstanding. Thus, to our knowledge, the company will commence operations in 2q17 with negligible debt and 18,966,375 common shares outstanding at an average gross price of USD 8.0/sh. See graph below for details an ownership structure.


Valuation: Our target price of USD 9.2/sh is based on a weighted average of current (USD 8.8/sh) and future NAV, in combination with a mid-cycle EV/EBITDA in 2018/19E.

Company specifics:


Peer overview:


Market fundamentals:


Disclaimer: The publisher currently has no investments in the company
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2 Responses to HUNT-US: Initiation (Neutral, TP 9.2)

  1. Bobby says:

    Hi, but what do you think of the purchases made ? Were they below market value? I doubt that Carval and the likes target a flat return, so where would be the upside coming from? Do you prefer this structure or another vehicle like Songa Bulk?

  2. admin says:

    Opportunity seems lost for the moment. Coverage pending…


    Hunter Maritime’s capesize deal falls apart
    Saverys-backed acquisition vehicle says too many holders sought to cash out.
    June 12th, 2017 16:21 GMT by Michael Angell
    Published in DRY CARGO
    Hunter Maritime Acquisition’s deal to buy up to five capesize vessels failed as a tender offer for shares threatened to drain cash reserves.

    Hunter, a blank cheque company set up by the Saverys family, raised nearly $152m last year in a public offering underwritten by Morgan Stanley to find distressed shipping assets.

    In addition to 15 million shares sold to the public, Morgan Stanley signed on for 173,100 shares in the company as part of an overallotment option.

    It made its first deal in April with a purchase of five capesize bulkers owned by the Oskar Wehr Group for an initial consideration of $139.4m.

    It later sought to reduce the purchase price to $133.5m.

    But that deal hinged on completing a tender offer to buy back 8.2 million of its Class A common shares, roughly half of the shares sold to the public last year, at $10 per share.

    The Alexander Saverys-led blank cheque company says certain conditions of the tender offer were not met, including the condition that “not more than” 8.2 million shares were tendered back to the company.

    Hunter said it could only buy back that specific number of shares because it had to retain a cash balance of at least $69.4m to partially fund the vessel acquisition, pay down its underwriting fees and provide working capital. The remainder of the vessel acquisition price was to be funded from $70m in debt.

    But with too many shares being tendered, the company said it is “terminating effective immediately” the offer and is likewise terminating the vessel deal.

    Hunter has a 24-month deadline from its public offering last November to find potential acquisitions or return capital to its shareholders. The company said it is still looking for potential acquisitions. A Hunter representative was unavailable to comment by presstime.


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