GRIN - Grindrod Shipping (GRIN) - A Solid 3Q2021 Beat and Higher than Expected Initial Dividend
Noble Capital Markets –3Q2021 Adjusted EBITDA of $69.0 million exceeded our $65.8 million estimate. Positive variances in opex and charter hire costs more than offset negative variances in G&A expenses and TCE revenue, namely in Supra/Ultras. TCE rates were $29.9k/day for Supra/Ultras and $25.9k/day for Handys. Please note that the EBITDA numbers are pre-IFRS adjustments. Variable dividend policy kicked in and declared 3Q2021 cash dividend of $0.72/share was above our dividend estimate of $0.59/share, which included buybacks of $0.07/share. Dividend estimates are $0.68/share in 4Q2021 and $2.03/share in FY2022.Management call today at 8am EST. Number is 877-553-9962 and code is Grindrod. We expect color on: 1) the dry bulk market; 2) tone of forward cover versus 3Q2021, ie lower days booked; 3) rates on short-term charter hires; 4) changes in the cargo book; 5) opex and G&A expenses 6) new disclosure on each purchase option on charter-ins; and 7) stance on buybacks given the current stock price.Fine tuning 2021 EBITDA to $198.8 million based TCE rates of $23.6k/day on Supra/Ultras and $21.1k/day for Handys. 4Q2021 forward cover of ~70% looks good with 1,579 Supra/Ultra operating days booked at $33.1k/day and 1,205 Handy days booked at $30.3k/day. Less days than 3Q2021 but higher rates. Our 4Q2021 EBITDA moves to $67.3 million based on TCE rates of $30.3k/day for Supras/Ultras and $27.3k/day for Handys.Knock on impact moves 2022 EBITDA estimate higher to $192.5 million from $195.9 million based on TCE rates of $25.5k/day for Supras/Ultras and $20.5k/day for Handys. Our estimate builds in a return of typical seasonal patterns, but operating leverage is high and each $1.0k/day change in TCE rates has a $11.0 million impact on EBITDA/cash flow.Maintain Outperform rating and price target of $31.00/share. A high quality asset base, consistent TCE rate outperformance and simplified corporate structure are positives, in addition to the firmer dry bulk market. Even though up 223% this year, the stock has dropped three straight months and is down 12% in 4Q2021. We believe that the current valuation and risk reward profile remain attractive, especially with the new variable dividend policy and the completed acquisitions of the last joint venture interest and the IVS Phoenix Ultra. Trading at an enterprise value multiples of 2.1x estimated 2021 EBITDA and 1.5x estimated 2022 EBITDA, we believe that there is substantial upside potential.Senior Analyst: Poe FrattContact at: pfratt@noblecapitalmarkets.comREPORT ATTACHED – if you experience difficulties obtaining the report, please, contact Director of Research at: mkupinski@noblecapitalmarkets.com Read More >>