40% NAV discount unwarranted


STAR BULK ~40% NAV discount unwarranted We find the current ~40% NAV discount unwarranted given the 112 scrubber-fitted fleet by 2020, which should see excess cash flow for Star Bulk versus its peers. We initiate coverage with a BUY recommendation and USD16.8 target price.
Largest dry bulk company by number of vessels, second in market cap. Star Bulk is the largest dry bulk company measured by number of ships – M&A over the past year has boosted its fleet by more than 50% to 112 vessels. It ranks second to Golden Ocean in market capitalisation. Star Bulk is represented across all vessel sizes, and is rather evenly distributed with its 39 Capesize, 42 Panamaxes and 31 Supramaxes. Star Bulk has 50% market-adjusted leverage and a fleet age profile of eight years, in line with the dry bulk peer group’s average.
Set to retrofit 100% of vessels with scrubbers before January 2020. Star Bulk’s installation programme aims to scrubber-fit its fleet by January 2020, with a total capex programme of USD185m and 70% debt financing to fund the installation programme at an average margin of <3.0%, which we find attractive. We see a 2-year payback on a Capesize scrubber investment and calculate a NPV of USD1.8m (~7% of 10-year old), but value the scrubber at USD4.5m as we look at the investment over a 5-year period. For 2020, we forecast that a scrubber-fitted Capesize vessel would earn a USD3.5k/day premium to a Capesize vessel burning low sulphur fuel.
Industry-leading opex and low cash break-even. We observe that Star Bulk would have had a negative margin relative to its cash break-even in only eight out of the past 27 years. More importantly, thanks to its low cash break-even of USD11.6/day, the negative margin during those years would have been only USD1k/day, which we believe shows its resilience to withstand weak markets.
Initiate coverage with BUY recommendation and USD16.8 target price, based on a 20% discount to our 1-year forward NAV of USD21.0/share. We calculate a current NAV of USD16.4/share based on 11% upside potential to dry bulk second-hand prices (DNB Markets asset value model). We include a USD2.3/share scrubber premium in our current NAV calculation; hence, excluding the scrubber valuation, the current NAV would be USD14.1/share. We calculate that every 10% change in asset prices would yield a 17% change in the NAV, or USD2.8/share.
BUY
JSL
07.01.2019 kl 11:55 478

Det var også veldig positivt at kinesiske myndigheter godkjenner jernbaneprosjekter til en verdi av 125 mrd dollar (kilde: DN Investor), og når de i tillegg har lagt ned forbud mot import av skrapjern (ble nevnt i et annet innlegg her på HO forum) så kan det vel tenkes at ratene kan få seg en pen dytt oppover etterhvert.

Fremdeles ute av bulk Volf?
Volf
07.01.2019 kl 14:15 417

Holder bare på med små tradingposter,venter til etter kinesisk nytt år og ser utviklingen US/Kina før jeg går inn for fult.
Ha en fin dag.

Ticker SBLK /SBLK-R da, men takk for dette og mange andre gode shipping-innlegg, Volf :-)