ESEA - Euroseas Ltd. (ESEA) - Strong 2Q2021 Results and Term Charter on Diamantis
Adjusted 2Q2021 EBITDA of $10.5 million in line with expectations after adjusting for claim award on a failed 1Q2020 sale of the Manolis P. Call with management today at 9am EST—number is (877) 553-9962 and code is Euroseas. TCE revenue of $18.8 million increased from $14.7 million in 1Q2021 due to a $2,719 move up in TCE rates to $14,853/day from $12,134/day and higher shipping days of 1,273 versus 1,219 in 1Q2021, with only one idle day versus 41 in 1Q2021.Another feeder secured term charter at higher TCE rate. The Diamantis P, a 1998-built 2,008 TEU feeder, secured a charter through October 2024 (min of 36 months and max of 40 months) at a TCE rate of $27.0k/day (up from $6.6k/day). Three feeders (Corfu/Evridiki/Astoria) and one intermediate (Oakland) are available for charter over the next six months, and recent charters on the Oakland intermediate and Spetses/Diamantis P feeders set a positive tone.Fine tuning 2021 EBITDA estimate to $47.6 million based on TCE rates of $17.4k/day. The Diamantis P charter expands forward cover to 96% at TCE rates of $16.2k/day. Since the container market has been stronger than expected and charters have become longer, only 4% of 3Q2021 available days and 14% of 4Q2021 available days are open.Fine tuning 2022 EBITDA estimate to $70.9 million based on TCE rates of $23.6k/day. The Diamantis P charter expands forward cover to 69% at TCE rates of $20.7k/day from 62% at TCE rates of $19.8k/day. Forward cover should move higher with upcoming charters on the three feeders and one intermediate.Maintain Outperform rating and price target of $30.00/share. Our container market outlook stays favorable and numerous longer term charters at higher rates create forward cash flow visibility. Even though the stock was up 325% in 1H2021 and is recovering from the 18% drop in July, the stock is still down ~6% in 3Q2021. We believe that the current valuation remains attractive and the favorable risk/reward profile warrants a positive rating. Moreover, improving operating results and declining financial leverage should allow shareholder friendly moves, like paying a regular and/or special dividend. Read More >>