As we argued in our Dry Bulk: Sector Update in early April, share prices had moved too far too fast, disconnecting from the underlying fundamentals of the early expansionary phase of the cycle. We highlighted that the risk was skewed to the downside ahead of 2Q17E, and we issued three SELL recommendations and four Neutral. Since then, share prices have fallen some 30% before recovering somewhat in recent days, hitting or undershooting our target prices. Although share prices could fall even lower in the coming months, a period which is usually marked by a lull in activity ahead of an active Autumn market, we now find the risk/reward highly attractive. We upgrade the dry bulk sector to BUY (Neutral) and assign a BUY rating to nine of the 11 companies we cover.

Our top picks in the sector are:

  1. Genco Shipping (BUY, USD 21): 104% upside on last close
  2. Star Bulk (BUY, USD 14.2): 59% upside on last close
  3. Seanergy Maritime (BUY, USD 1.39): 96% upside on last close

A quick glance at fundamentals QTD indicates that net fleet growth for 2Q17E is approximately 0.6% q/q (vs our 1.2% forecast), versus an implied demand growth of 1.0% q/q (-1.1% forecast).

Dry Bulk – Supporting slides

Please see our initiation reports for more information on each company we cover.

p1

 Disclaimer: The publisher currently owns shares in BULK-NS, EGLE-US, GNK-US, GOGL-NO, SHIP-US, SBLK-US

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s