Friday, September 28, 2012

Baltic Trading Limited: Hidden Gem In Stormy Seas

The bulk shipping industry has been hit by stormy weather for quite some time now, as a result of massive deliveries of new-building vessels. The over supply of tonnage has resulted in a depressed freight market and valuations of publicly traded shipping companies have followed suit.

Low valuations have naturally attracted bargain-basement investors. Yet despite all-time low prices, I believe that the risk of owning many shipping companies still outweighs their potential reward. With mounting losses and dwindling cash reserves, most shipping companies are merely fighting to stay afloat, hoping many times against hope that they will live to see another day.

In this series of articles, I will review a group of shipping companies operating in the dry cargo segment of the industry, arguably among the worst hit and most endangered species. Amid this gloom, I have decided to start on a positive note, reviewing Baltic Trading Limited (BALT), a company I believe offers an attractive risk/reward profile at a dirt-cheap price.

Baltic Trading is a small shipping company that owns nine modern vessels ranging in size from 34,000 MT to 178,000 MT in DWT capacity. The average age per vessel was 2.7 years as of June 30, 2012. The company launched its IPO in March 2010, selling 16.3 million shares at $14 per share. The same share could be yours today for $3.14, off its all-time intra-day
low of $2.98. Baltic Trading has a market capitalization of approximately $71 million.