Tuesday, October 28, 2014

Scorpio Bulkers Inc. - A Buying Opportunity With Some Strings Attached

  • Scorpio Bulkers has lost more than 50% or $700 million in market value since its IPO
  • SALT is adequately capitalized to meet its funding requirements in 2015.
  • Current share price represents a 100% profit potential over the next 12 months.
  • But risk of dilutive offerings to bridge equity gap in 2016 remains.

This year has been very grueling for shareholders of Scorpio Bulkers Inc. (SALT). The dry cargo shipping start-up spent most of 2013 and the beginning of 2014 like a drunken sailor, ordering 80 new-building vessels while raising a staggering $1.2 billion in equity. Its audacious fund-raising culminated with an oversubscribed IPO last December at $9.75 per share.

About three months after its market flotation the company’s shares started a gradual decline below its IPO level. Since the beginning of September the decline has been almost precipitous. On October 15th its shares briefly traded at an all-time intra-day low of $4.00 per share.

The stock price has rebounded since then but only so slightly. Last Thursday it closed at $4.72 per share. It is amazing to think that Scorpio Bulkers has lost almost $700 million in market capitalization since its IPO. Especially since the company has only taken delivery of one new-building vessel during the same period. Has the stock market overreacted to an admittedly very weak spot freight market? Has Scorpio Bulkers become a deep value play? What is the risk-reward profile for first time investors? In this article I hope to shed some light to all these questions...

Continue reading the article published on Seeking Alpha Pro.

Wednesday, July 30, 2014

Baltic Trading Limited Results for 2014-Q2

This estimate was as close to the actual results as it could be.

Baltic Trading Limited Announces Second Quarter Financial Results
Declares $0.01 per Share Dividend for Q2 2014
NEW YORK, July 30, 2014 /PRNewswire/ -- Baltic Trading Limited (NYSE: BALT) ("Baltic Trading" or the "Company") today reported its financial results for the three and six months ended June 30, 2014.

The following financial review discusses the results for the three and six months ended June 30, 2014 and June 30, 2013.

Second Quarter 2014 and Year-to-Date Highlights

Declared a $0.01 per share dividend payable on or about August 21, 2014 to all shareholders of record as of August 14, 2014 based on Q2 2014 results; and
Recorded a net loss of $5.7 million, or $0.10 basic and diluted net loss per share for the second quarter.
Financial Review: 2014 Second Quarter

The Company recorded a net loss for the second quarter of 2014 of $5.7 million, or $0.10 basic and diluted net loss per share. Comparatively, for the three months ended June 30, 2013, the Company recorded a net loss of $4.6 million, or $0.19 basic and diluted net loss per share.

EBITDA was $1.0 million for the three months ended June 30, 2014 versus $91,000 for the three months ended June 30, 2013.

John C. Wobensmith, President and Chief Financial Officer, commented, "During the second quarter, we continued to implement our fleet deployment strategy that provides the ability to drive future performance upon improvement in the prevailing freight rate environment. For the second quarter, we declared a dividend of $0.01 per share, increasing the cumulative dividend declared by the Company to $1.11 per share since going public in March 2010....

Monday, March 17, 2014

The Saga of Genco Shipping & Trading Continues, But the End Is Nearer

Genco Shipping & Trading Limited (GNK) has been on a death row since its admission last month that it had missed an interest payment and had negotiated a 30-day default waiver with its lenders. With the 30-day deadline fast approaching on March 18th, the company disclosed today that it was also not going to file its annual report on time. While failing to file a timely annual report is the least of the company’s concerns at this stage, it is important to note two additional disclosures made in today’s filing with the SEC.

First, the company’s annual report may include a going concern uncertainty disclosure. This should not come as a surprise to anyone since Genco has been classifying its debt outstanding (at the parent level) as current since March 31st, 2013.

Second, the company provided preliminary estimates for last year’s results on a consolidated basis. Despite an estimated operating loss of $67 million and a total loss of $157 million for the year, the company was able to generate approximately $4 million profit from operations during the fourth quarter of 2013.

This is the first time Genco is generating a quarterly operating profit in two years. Unfortunately it may come as too little too late for its shareholders.

Given its fast deteriorating cash balance, it is very likely that Genco will seek court protection from its lenders as early as this week.

But not all may be lost for shareholders. As I analyzed in my recent Seeking Alpha Pro article, while the company’s capital restructuring is inevitable, improving freight markets and asset values may still leave existing shareholders with a piece of the company’s new equity.

Tuesday, February 25, 2014

Shipping Preferred Shares

I recently had the opportunity to publish a detailed survey of shipping preferred shares on Seeking Alpha. Shipping companies have been busy issuing preferred shares as a way to raise equity funds without diluting common shareholders. 

Whether preferred shares are a one-time hit wonder or a permanent trend remains to be seen. But there has been a critical mass of these securities to warrant monitoring & follow-up. In the table below, I intend to update all pertinent information on existing shipping preferred shares, as well as new issues. 

I welcome your feedback on what information you would like to see and of any preferred shares I might have missed / should include in my survey.

Monday, February 17, 2014

Diana Shipping Inc. - Earnings Preview 2013-Q4

I estimate that Diana Shipping Inc. (DSX) will report a net loss of ($8,800,000) or ($0.11) basic loss per share for the last quarter of 2013. The company’s bottom line for the quarter has been negatively affected by the results of Diana Containerships Inc. (DCIX). During the quarter Diana Containerships sold one vessel for scrap, and took an impairment loss on a vessel scheduled for demolition this month. Based on my estimates, Diana Shipping’s loss from its investment in DCIX for the quarter was ($1.9 million).

The results were also negatively affected by the early redelivery of M/V Houston. The company had to write-off the entire $3.05 million prepaid charter revenue associated with M/V Houston during the quarter, instead of the scheduled $0.75 million amortization. 


As of year-end, Diana Shipping had total debt outstanding of $433 million, and cash on hand of approximately $240 million. Last August, the company had extended a four-year $50 million loan to Diana Containerships. This month Diana Shipping returned to the capital markets, raising $60 million in gross proceeds through the sale of 2.4 million preferred shares. The preferred shares pay an annual dividend of 8.875%.

As of year-end, the company operated a fleet of 36 owned vessels with a total DWT capacity of 4.1 million MT and an average age of 7.22 years. Diana Shipping currently has five new-building vessels under construction, two of which are scheduled for delivery in the first half of this year, and the remaining in 2016.

The shares of Diana Shipping are traded on the New York Stock Exchange and closed on Friday at $12.69 per share. Its current market capitalization is approximately $1.05 billion.

Thursday, February 13, 2014

A Survey Of Shipping Preferred Shares

Last Monday, Diana Shipping Inc. (DSX) tapped the market to raise $60 million by issuing 2,400,000 million series B preferred shares. This is the fourth time this year that shipping companies have issued preferred shares as an alternative to common equity. Earlier this year, Costamare Inc. (CMRE), Navios Maritime Holdings Inc. (NM) and Seaspan Corp. (SSW) raised $100 million, $50 million and $125 million respectively.

This follows a very busy year last year, when Tsakos Energy Navigation Ltd. (TNP), Safe Bulkers Inc. (SB), Box Ships Inc. (TEU), and Costamare Inc. (CMRE), had raised in excess of $215 million in preferred shares.

Preferred shares are hybrid securities that share elements with both corporate debt and common equity. They offer a great alternative to raise equity without diluting common shareholders. Yield seeking investors may find the risk-reward profile of preferred shares more suitable than common shares.

For a complete survey of common characteristics and differences of shipping preferred shares, please continue reading the full article published on Seeking Alpha.

Friday, February 7, 2014

Diana Containerships Inc. - Earnings Preview 2013-Q4

I estimate that Diana Containerships Inc. (DCIX) will report a net loss of ($19,400,000) or ($0.57) basic loss per share for the last quarter of 2013. The company’s bottom line for the quarter has been affected by three one-time events:

In December the company sold for demolition the 18-year old Spinel (formerly APL Spinel) for $9.65 million. I estimate the loss on the sale of Spinel will be $11.5 million (including $1 million in direct sale and other charges). In addition, the company just announced the demolition of 18-year old Sardonyx (formerly APL Sardonyx), a sister ship to Spinel, for $10 million. I anticipate that DCIX will record the approximately $9.2 million impairment loss for Sardonyx in the fourth quarter, to start with a clean slate for 2014.
Finally, the company had a gain of approximately $660,000 from the early redelivery of Spinel. 

Excluding these three events and based on my estimates, DCIX would record a net gain of $640,000, or $0.02 basic earnings per share. Based on cash generated from operations during last quarter, I expect that Diana Containerships will declare a quarterly cash distribution of $0.15 per share, unchanged from the previous two quarters.

After the disposal of Spinel, the company will own a young fleet of seven vessels plus the 18-year old APL Garnet.

Since last April and including the sale of Spinel, Diana Containerships will have disposed of five vessels for a total book loss of almost $60 million. I do not anticipate any further demolitions during 2014, since the APL Garnet is on a lease back charter with Neptune Orient Lines with earliest expiration in August 2015.

Diana Containerships has total indebtedness of $148.7 million, including $98.7 million from its $100 million credit facility with RBS and a $50 loan from sister company Diana Shipping Inc. (DSX). The $100 million credit facility matures in January 2017, whereas the $50 million loan is due in August 2017.

The shares of Diana Containerships are traded on the New York Stock Exchange and closed on Friday at $3.99 per share. Its current market capitalization is approximately $136 million.

Tuesday, February 4, 2014

The Coming IPO Of Diamond S Shipping Group

A new year, a new shipping IPO by private equity investor Wilbur Ross. Following on the steps of the very successful IPO of Navigator Holdings Ltd. (NVGS) last November, Diamond S Shipping Group, Inc. (DSG) filed today a registration statement with the SEC for an initial public offering.

Diamond S Shipping Group, Inc. currently owns a fleet of 33 medium range (MR) product tankers. The company had acquired the first 30 vessels from CIDO for $1.165 billion in 2011. Last December Diamond S acquired an additional three vessels from CarVal (an investment arm of Cargill, Incorporated) for $83.7 million. 

The IPO is intended to finance part of the acquisition cost of ten MR new-building vessels, currently under construction in Korea. The vessels will be delivered from September 2014 through January 2016. Diamond S has agreed to pay $380 million for the ten new-building vessels, and intends to raise $190 million, or 50% of the purchase price, in the upcoming IPO.

I have just started peering through the 206 page-long registration statement. I intend to follow-up with a complete analysis and valuation in the coming days. Until then, I would like to make the following observation:

The consortium of private investors led by WL Ross & First Reserve first committed $1 billion in equity to Diamond S Shipping Group in August 2011. The equity infusion was meant to finance the acquisition of the 30 MR tankers from CIDO, plus the construction cost of ten new-building vessels (eight Suezmax and two LR2 product carriers), that Diamond S had already ordered.

Those ten vessels, which have since been delivered to the company, are conspicuously absent from the upcoming IPO. Diamond S has decided to market itself as a pure MR play. Given the buzz surrounding medium range product tankers on Wall Street these days, I cannot blame them.

Scorpio Bulkers Inc. - Charter-In Agreements For Five Dry Bulk Vessels

Less than a month after its largest new-building order and a fully subscribed IPO, Scorpio Bulkers Inc. (SALT) has struck again, albeit more modestly. This time it announced the leasing of five vessels (two Panamax, two Kamsarmax, and one Post-Panamax) on medium-term charters (of about one year or less), at an average rate of approximately $15,000 per day. Details of the charters are as follows:


I do not expect the charters to make a material contribution to free cash flow or the bottom line. The company will have approximately 1,500 trading days at $14,935 per day to turn an operating profit. The daily cash break-even rate is more or less in line with the current FFA curve if not slightly higher. 

On the other hand the charters will help the fledgling company set up its chartering department and get its feet wet in spot freight trading. 

The article was published on gCaptain on February 4th, 2014 

Saturday, February 1, 2014

Scorpio Bulkers Inc. - Like A Bull In A China Shop

Dry cargo start-up Scorpio Bulkers Inc. (SALT) has managed to go from zero to one hundred in less than twelve months. Since its incorporation in March 2013 it has grown to a serious contender in the dry cargo shipping industry. Scorpio Bulkers has raised more than $1.2 billion in gross proceeds in four equity offerings, including a fully subscribed IPO last December. Today, it sports a market capitalization of almost $1.4 billion. Despite its over-ambitious $2.8 billion new-building program, it has raised sufficient cash to keep its leverage ratio below 60% without any further equity offerings.

Is this folly or sanity? Only time will tell whether Scorpio Bulkers will become the most successful story this side of Frontline Ltd. (FRO), or be blown apart. But if potential investors like the odds for a strong recovery in dry cargo shipping over the next two years, they may want to take a good look at Scorpio Bulkers.

Continue reading the full article published on Seeking Alpha Pro.

Friday, January 17, 2014

Baltic Trading Limited - Earnings Preview 2013-Q4

Spot-market oriented dry cargo shipping company Baltic Trading Limited (BALT) is expected to return to profitability snapping a seven-quarter losing streak. I estimate that BALT generated net income of $2,150,000 or $0.04 basic earnings per share during the last quarter of 2013. I also expect the company to double its cash distribution for the fourth quarter of 2013 to $0.04 per share. 

Following a slew of recent vessel acquisitions, including its first new-building order for four eco-design Ultramax vessels (DWT 64,000 MT), BALT is poised to capitalize on its chartering strategy. All of its vessels have spot exposure, being employed in spot index-related time charters or in commercial pools. The company currently operates 13 dry cargo vessels, with a total DWT capacity of 1,100,000 MT and an average age of just 3.8 years as of December 31st, 2013.

Baltic Trading had a very busy year last year. It acquired four vessels at a total cost of approximately $145.5 million. It also ordered four new-building vessels at a contract price of $112 million. To finance its fleet growth, BALT raised $136 million in net proceeds from three equity offerings. It also borrowed $66 million under two credit facilities.

Baltic Trading has a very conservative balance sheet. Its total debt outstanding at year-end stood at $168 million. This compares favorably to its current market capitalization of $356 million (based on last Friday’s closing price of $6.18 per share).