Tuesday, August 7, 2012

Eagle Bulk Shipping Inc. - Earnings Estimate For 2012 Q2

For the quarter ended June 30th, 2012, we estimate that Eagle Bulk Shipping Inc. (NASDAQ: EGLE) generated a net loss of ($14,700,000) or basic earnings per common share of ($0.94). Basic earnings per share reflect the company’s 4:1 reverse stock split during the quarter.

We estimate that the company’s fleet of 45 owned-vessels generated net TCE Revenues of $48,300,000 for an average TCE of $11,850. We also estimate that EBITDA was $16,200,000, and Adjusted EBITDA (for credit agreement purposes – excludes stock compensation expense) was $19,300,000.

According to our estimates, EGLE had approximately $34,000,000 cash on hand (including restricted cash), as of the end of the quarter.

Eagle Bulk Shipping owns a fleet of 45 SUPRAMAX dry cargo vessels with a total DWT capacity of approximately 2,450,000 MT, and an average age per vessel of 5.3 years as of June 30th, 2012.

Monday, August 6, 2012

Safe Bulkers Inc. - Earnings Estimate For 2012 Q2

For the quarter ended June 30th 2012, we estimate that Safe Bulkers Inc. (NYSE: SB) generated net income of $20,900,000 or $0.27 earnings per share. We also estimate that adjusted net income was $23,900,000 or $0.31 per share. (Adjusted net income excludes any gain/(loss) on derivatives; we estimate that net loss on derivatives was $3,000,000).

We estimate that the company’s net TCE Revenues were $45,000,000 & the fleet average TCE was $24,300. We also estimate that SB generated EBITDA of $30,600,000, and adjusted EBITDA of $33,600,000.

Based on the company’s operating performance, we forecast that the company will declare a quarterly dividend of $0.15 per share, unchanged from the previous quarter.

With the delivery of M/V PEDHOULAS LEADER during the quarter, Safe Bulkers is operating a fleet of 21 bulk carriers (consisting of 5 PANAMAX, 4 KAMSARMAX, 10 POST-PANAMAX, & two CAPE size vessels), with a total DWT capacity of 1,968,000 MT, and an average age of 4.1 years as of June 30th 2012.

In addition, the company has a remaining new-building program for 8 vessels with a total DWT capacity of 741,200 MT. Three of these vessels are scheduled for delivery during the remainder of 2012.

Wednesday, August 1, 2012

20% Dividend Yield – Gold Mine or Fool’s Gold? The Case for Investing in Diana Containerships Inc.

Diana Containerships Inc. (NASDAQ: DCIX) declared a quarterly dividend of $0.30 per share in today’s earnings report, in line with its amended dividend policy and previous guidance. Just last month DCIX had issued 8,100,000 new shares in a public offering at $6.25 per share. The stock closed yesterday at $6.13 per share. The dividend yield at the public offering price is a whooping 19.2% on an annualized basis. Is this too much of a good thing? Is the dividend rate sustainable? What risks, hidden or not, are associated with such an investment?

DCIX owns a fleet of nine panamax containerships, ranging in capacity from 3,426 TEU to 4,729 TEU, and with an average age of 14.0 years as of June 30th, 2012. Two of the company’s vessels were acquired as new-building units. The remaining seven vessels were acquired in three separate sale/lease-back transactions over the past 14 months.

As is typical in many sale/lease-back transactions, the buyer (in this case Diana Containerships) acquired the vessels at an above FMV price, in exchange for an above FMV charter rate. DCIX paid $196.5 million for the seven vessels that came attached with an average gross charter rate of $22,820 per day, and an average remaining duration of 1.5 years as of June 30th, 2012.

The good news about this type of sale/lease-back transaction is that DCIX can immediately pass the cash flow from the charters to the shareholders. Indeed, the company in its amended dividend policy, vowed to distribute 100% (up from 70%) of its operating cash flow to shareholders, minus any cash expenditures or reserves for vessel dry-dock maintenance and special surveys.

We believe that DCIX has the capacity to pay the current quarterly dividend rate of $0.30 per share, not indefinitely, but for the duration of the existing sale/lease-back charters. (To achieve this goal, DCIX would have to acquire two to three additional vessels on similar terms but we believe that the company has the capacity to do it with approximately $70 million cash on hand plus a potential $50 million line of credit increase)

The bad news is that DCIX has assumed a major residual risk in terms of charter replacement and asset values.

To demonstrate how volatile the time charter market can be, consider the just announced employment for M/V CENTAURUS, one of the company’s two new-building units. The vessel is coming off a two-year charter at $20,000 per day and was fixed for 8 to 12 months at $7,500 per day!

But the real question is how much the company’s assets will be worth once the sale/lease-back charters are done. DCIX today has an enterprise value of approximately $220 million. The only tangible assets are its nine vessels. At the end of 2013, the company’s fleet will be on average 15.5 years old. Will it be worth more or less than $220 million? This is the million-dollar question.

Investors may buy the stock as a dividend play, but in reality the stock is more of an asset play in a sector/industry that have traditionally been among the most volatile. It seems after all that 20% dividend yields are never served as free lunches.