Maxim analyst James Jang on Tuesday boosted his Seanergy Maritime Holdings Corp. (NASDAQ:SHIP) share-price target from $2.00 to $3.00, after the company reported stronger than expected third-quarter results. The analyst pointed out that the increased long-haul iron ore trade from Brazil to the Far East helped SHIP in the past quarter. (To watch Jang’s track record, click here)
Specifically, SHIP reported net revenues of $9.4 million, operating EPS of $0.08, net income of $6.5 million, and EBITDA of $2.8 million, which were all above expectations.
Jang commented, “We believe our thesis for a dry bulk recovery is being pulled ahead and are raising our estimates for SHIP. We are now looking for revenues of $38.7 million ($34.8 million prior) in 2017, $55.5 million ($50.9 million prior) in 2018, and $70.6 million ($65.7 million prior) in 2019. Given our revenue forecast, we estimate that SHIP will report an operating loss of ($0.17) per share in 2017 (loss of $0.45 prior), operating EPS of $0.09 in 2018 (operating loss of $0.04 prior) and operating EPS of $0.29 in 2019 ($0.28 prior). And we now expect EBITDA of $13.9 million ($10 million prior) in 2017, $29.4 million ($24.8 million prior) in 2018, and $44.5 million ($39.6 million prior) in 2019.”
Jang concludes, “By our calculations, there should be a further 15%-20% increase in Capesize asset values through 2018, and with SHIP generating outsized earnings ahead of our forecast of a dry bulk recovery during 4Q17-1Q18, we believe SHIP is undervalued. Therefore, we are raising our price target to $3, from $2 and maintaining our Buy rating.”
Seanergy Maritime CEO Stamatis Tsantanis stated, “During the third quarter of 2017, the Capesize market continued its improving course that commenced in the beginning of the year. Our fleet benefited significantly from the stronger Capesize rates. In particular, in the third quarter of 2017, the daily Time Charter Equivalent (TCE) rate1 of our Capesize fleet was $11,678, increased by 149% as compared to the same period last year. For the nine months ended September 30, 2017, the daily TCE rate of our Capesize fleet was $11,017, increased by 153% as compared to the same period last year. “This was reflected in our operating results where our adjusted EBITDA1 was $2.8 million and $6.3 million for the third quarter and nine months of 2017, respectively. In regards to our profitability in the third quarter of 2017, net income stood at $6.5 million, as compared to a net loss of $5.9 million in the same period of 2016. “In addition, we completed the previously-announced refinancing of one of our Capesize vessels, generating a $11.4 million gain and equity accretion. This transaction resulted in a material increase of about 38% of the Company’s total equity value.”
“Turning to market fundamentals, in 2017 dry bulk charter rates have stabilized at higher levels than in previous years, as the Baltic Capesize Index (BCI) has averaged about 1,839 points year to date, which is 112% higher than the 868 average level recorded in the same period of 2016. Furthermore, the expected annual growth in seaborne transportation of Capesize commodities is estimated at 6% for the years 2017 and 2018 while the Capesize orderbook currently stands at 3% of the existing fleet, which is the lowest point of the last 15 years. In the fourth quarter of 2017, 63% of our Capesize operating days are fixed at an average daily rate of approximately $15,720 and 65% of our total operating days are fixed at an average daily rate of approximately $14,890 as of the date of this release,” Tsantanis continued.