Saturday, December 29, 2012

Safe Bulkers: A Pending Catalyst To Improve Price Performance

In December 2010, Safe Bulkers (SB) contracted with a Chinese yard for the construction of a Cape-size vessel (180,000 MT DWT Capacity). The vessel was originally expected to be delivered to SB during the third quarter of 2012, but in any case not later than December 31st, 2012. During the most recent earnings conference call, the company's CEO Mr. Polys Hajioannou disclosed that the yard was facing significant construction delays and would not be in position to meet the delivery deadline. Mr. Polys Hajioannou also briefly discussed the options available to the company stemming from the yard's inability to meet its contractual obligations.

I believe that SB has a huge bargaining chip on its side that could greatly improve its current financial position. The contracted price for the new-building vessel was $53 million. In today's market environment, the resale price of a Cape-size new-building vessel is approximately $41 million.

Safe Bulkers: Would Low Valuation Lead To A Management Buyout?

In two of my previous articles, I had the opportunity to look at Safe Bulkers Inc. (SB) as a potential investment in a diversified shipping portfolio. I also examined the company's risk exposure stemming from its long-term period deals with troubled shipping company Daiichi. Since writing my articles last September, Safe Bulkers' shares have lost almost half their value in a span of less than three months.

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