ESEA - Euroseas Ltd. (ESEA) - An Extraordinary Data Point Boosts EBITDA Estimates
Short charter on the Oakland intermediate secured at an extraordinary rate of at least $195k/day. Yesterday morning, news hit that the 2009-built Oakland intermediate secured a short charter of 60—85 days at a TCE rate of at least $195.0k/day. The charter, which should start by the end of October, could generate gross TCE revenue of at least $11.7 million.Container market remains firm and upcoming fixtures should be favorable. Charters on the Oakland, Jonathan P and Diamantis P are good examples of a strong container market. Four feeders (Corfu/Evridiki G/Astoria/Aegean Express) and one intermediate (Oakland) are available for charter over the next six months.Increasing 2021 EBITDA estimate to $55.1 million from $47.6 million based on TCE rates of $18.9k/day from $17.3k/day. The new TCE rate on the Oakland, which should kick in by the end of October, is a significant step up from the current TCE rate of $64.7k/day. As a result, our 4Q2021 EBITDA estimate moves to $25.3 million from $17.9 million, based on a TCE rate of $28.5k/day, up from $22.5k/day. Combined with other time charters, the 2021 forward cover is 97% at TCE rates of $18.9k/day, with only 9% of 4Q2021 available days open.Increasing 2022 EBITDA estimate to $89.0 million from $76.8 million based on TCE rates of $26.2k/day, up from $23.7k/day. While the Oakland intermediate charter doesn't impact 2022 forward cover, we are assuming a higher TCE rate of $75.0k/day for the Oakland in 2022 and there is a positive impact on our 2022 EBITDA estimate. While our assumed TCE rate looks low, congestion has played a significant role in pushing up TCE rates and it is difficult to gauge how long it will last. There could be upside to the TCE rate on the Oakland and each $5.0k/day change has a $1.8 million impact on EBITDA/cash flow.Maintain Outperform rating and increasing price target to $35.00/share from $30.00/share. Our container market outlook stays favorable and the numerous longer term charters at higher rates create forward 2022 cash flow visibility. Even though the stock was up 325% in 1H2021, the stock is up only 8% in 3Q2021 despite improving fundamentals, new time charters and an acquisition. We believe that the current valuation remains attractive and shareholder-friendly moves, like paying a regular and/or special dividend if added acquisitions don't materialize, are likely later this year. Read More >>