GRIN - Grindrod Shipping (GRIN) - Attractive 2022 EBITDA and Dividend Outlook Intact
Very strong finish to year. 4Q2021 EBITDA above expectations. 4Q2021 EBITDA of $72.7 million was higher than our estimate of $67.3 million mainly due to robust TCE rates of $30.8k/day for Supras/Ultras and $28.8k/day for Handys, which were higher than our estimates of $30.3k/day for Supras/Ultras and $27.3k/day for Handys.Positive dividend surprise and cash dividend stayed at $0.72/share even though stock buy backs were higher than expected. The cash dividend was maintained at $0.72/share despite higher-than-expected stock buy backs. We expected the cash dividend to drop to $0.16/share due to higher stock buy back activity, but were pleasantly surprised that incremental cash was allocated to keep the cash dividend at the 3Q2021 level. Combined with stock buy backs of $0.55/share, total 4Q2021 dividend equates to $1.27/share.Positive bias to 2022 EBITDA and dividend estimates. Due to strong 4Q2021 results, high 1Q2022 forward cover and management color on the call, we moved our 2022 EBITDA to $202.0 million (up from $197.7 million) based on TCE rates of $25.5k/day for Supras/Ultras and $22.1k/day for Handys. 1Q2022 is off to good start with forward cover of 1,474 Supra/Ultra operating days booked at $24.4k/day and 1,103 Handy days booked at $21.9k/day. Based on our EPS estimate of $5.98/share and a minimum payout ratio of 30%, our 2022 cash dividend estimate is $1.86/share with no stock buy backs.Purchase options on chartered in Supras/Ultras represent additional growth opportunities. Sale of older Handy assets might be attractive too. Unlike the IVS Phoenix, there are five Supra/Ultras (out of seven) chartered in on a long-term basis that have purchase options that range from $15.6 million to $25.2 million. The purchase options create some visibility on potential fleet growth, while maintaining a degree of flexibility due to the existing charter in terms.Maintain Outperform rating and price target of $31.00/share. While the stock is up more than 60% in February, including a gain of 19% after 4Q2021 operating results were released, and we wouldn't be surprising to see some profit taking after the strong price performance, we believe that the risk reward profile remains attractive. Trading at an enterprise value multiple of 2.6x estimated 2022 EBITDA, we believe that there is substantial upside potential. Read More >>