Monday, April 29, 2013

Baltic Trading Limited - Earnings Preview 2013 Q1

Baltic Trading Limited (BALT) is scheduled to report earnings for the quarter ending March 31st, 2013, after market closing on Wednesday May 1st. I estimate BALT to report a net loss of ($5,000,000) for the quarter or the equivalent of ($0.22) per share. TCE revenues were negatively affected by continuing softness in spot freight markets, especially in the cape size sector. I estimate that TCE revenues were $5,625,000. The fleet average TCE per day on this basis would be $6,950, below the company’s operating cash break-even rate of about $7,900. I expect BALT to report negative EBITDA & Operating Cash Flow for the quarter.

BALT has moderate debt leverage. Its debt outstanding is $101,250,000. As of March 31st, 2013, the company had the capacity to borrow an additional $28,750,000 under its credit facility, including $23,500,000 for working capital purposes. The credit facility expires in November 2016. Based on the facility’s amortization schedule and current debt outstanding, BALT does not have any scheduled debt repayments before November 2015.

BALT has in the past declared variable quarterly cash dividends based on cash available for distribution, but also after taking into account the company’s cash flow, liquidity and capital resources. Based on the company’s formula for cash available for distribution, BALT would not have the capacity to declare a cash distribution this quarter. But after taking into account that: (I) BALT has paid a consecutive dividend since its IPO in March 2010, and (II) BALT has previously declared dividends in excess of cash available for distribution, I expect BALT to declare a cash distribution of $0.01 per share for the first quarter.

BALT operates a diversified fleet of 9 dry cargo vessels, consisting of 3 handy size vessels, 4 supramax size vessels and two cape size vessels, with a total DWT capacity of approximately 672,000 MT, and an average age of 3.4 years as of March 31st, 2013.

Based on Monday’s closing price of $3.42 per share, BALT has a market capitalization of $79,000,000.

The stock has consistently traded below its net asset value (NAV) for the past six quarters. Based on figures provided by BALT in its annual report filed with the SEC, the fair market value of its fleet at year-end was $204,000,000. On this basis, the company’s NAV was $4.62 per share.

I expect BALT to continue treading water for the foreseeable future, since all its vessels are trading in the spot market. Also with scheduled dry-docks coming due this year, I expect the company’s cash break-even rate to increase. But I like the stock for its moderate debt level and discount to its Net Asset Value.

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