Tag Archives: sblk

SBLK-US (BUY, TP 14) 3Q17 Review: Weak 3Q17 but TP unchanged

The 3Q17 report was a bit soft in our view, with average TCE of $9.6k/d vs our 10.7 forecast and G&A $2m higher than expected. Thus, EBITDA of $26m came in below our $35m forecast and consensus at 30m. EPS of -0.12 compares with our +0.02 forecast and consensus’ -0.02. No significant surprises in the report, but we lift our near-term estimates as the company reports 80% of fleet days in 4Q17 locked in at $12.6k/d (vs our $11.3 estimate). Although we see short term downside risk to shares from falling spot rates, significant price depreciation would represent an opportunity to BUY the share. We reiterate our 1y TP of $14/sh.

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Dry Bulk Sector Update (BUY): Risk/Reward Still Attractive

As we correctly pointed out in mid-April, share prices were likely to be impact from the falling iron ore prices in 2Q. A similar pattern is developing as this report hits the press, and is key to the way forward for rates and shares in 4Q17E. Nevertheless, the low supply growth leaves us confident in the continued cyclical recovery over the next two years, and we reiterate our BUY recommendation on the Dry Bulk sector as we view the risk/reward as highly attractive in a historical context.

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Dry Bulk: Sector Upgraded to BUY

As we argued in our Dry Bulk: Sector Update in early April, share prices had moved too far too fast, disconnecting from the underlying fundamentals of the early expansionary phase of the cycle. We highlighted that the risk was skewed to the downside ahead of 2Q17E, and we issued three SELL recommendations and four Neutral. Since then, share prices have fallen some 30% before recovering somewhat in recent days, hitting or undershooting our target prices. Although share prices could fall even lower in the coming months, a period which is usually marked by a lull in activity ahead of an active Autumn market, we now find the risk/reward highly attractive. We upgrade the dry bulk sector to BUY (Neutral) and assign a BUY rating to nine of the 11 companies we cover.

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Dry Bulk: Sector Update

The first quarter of the year definitely surprised on the upside in terms of seasonally high earnings and rising asset prices. The latter is natural when considering that most listed players have a strong currency in its share price after the recent surge, and we have seen several very accretive shares-for-ships type deals. Although we have a positive view on the dry bulk sector, we are lukewarm to the shares as too much of the cyclical upturn is already priced in. Earnings are lagging with a median EV/EBITDA of 28x in 2017E and 17x in 2018E on our estimates. Thus, we find the current valuation too steep, although with a few company-specific deviations. Any potential fall in share prices could represent an excellent opportunity to buy.

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