GRIN - Grindrod Shipping (GRIN) - Added Stock Buy Backs Reinforce Favorable Outlook
Added buy backs of $1.65 million announced. Over the past two weeks, an additional ~109k shares were bought back at an average price of $15.20/share, or $1.65 million. Combined with earlier buy back of ~592k shares at an average price of $14.38/share, a total of ~700k shares have been bought back in 4Q2021 at an average price of $14.51/share, or $10.16 million. This number is ~4% of the shares outstanding and represents a significant jump from ~92k shares bought back at an average price of $14.87/share, or a total of $1.4 million, in 3Q2021.No change to 2021 EBITDA estimate, but higher than expected stock buy backs lower cash portion of 4Q2021 dividend estimate. Due to continued higher-than-expected stock buy back activity (earlier buy backs were highlighted in a December 10th note), our 4Q2021 dividend estimate of $0.69/share now includes cash of $0.16/share (down from $0.25/share) and stock buy backs of $0.53/share (up from $0.45/share).No change in 2022 EBITDA and dividend estimates. Based on our EPS estimate of $5.40/share and a minimum payout ratio of 30%, our 2022 dividend estimate is $1.69/share.Largest shareholder selling at a premium. Earlier this month, Remgro LTD, the largest shareholder, lined up the sale of a 23.4% stake in GRIN to Taylor Maritime (TMI) for $77.9 million in cash in a private transaction. There is no economic impact on GRIN, but the addition of TMI as the largest shareholder and the high premium are positives.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. In addition, the largest shareholder has lined up a buyer at a solid premium to the current stock price. Even though up 251% this year after moving up 15% off the 4Q2021 low of $12.83/share in early November and a cash dividend of $0.72/share was paid, the stock is down 4% 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 2.3x estimated 2021 EBITDA and 1.6x estimated 2022 EBITDA, we believe that there is substantial upside potential. Read More >>