GRIN - Grindrod Shipping (GRIN) - Moving Price Target Up For Positive Developments
Increasing 2021 EBITDA estimate. Given the firmer state of the dry bulk market, we are increasing our 2021 EBITDA to $71.1 million from $59.6 million. There is limited visibility into the second half of the year and we have to wait until August to see actual 1H2021 numbers, but operating results should be solid. Compared to 2H2020 average Supramax rates of ~$11k/day, both Supra and Handy rates are currently above $20.0k/day.Added asset sales improve fleet profile and enhance dry bulk market focus. The sales of two MRs and one small tanker for more than $49 million is positive since it shifts the focus toward the dry bulk market and improves the fleet profile. All sales were completed this quarter.Asset sales reduce financial leverage and boost liquidity. Disciplined capital strategy intact and buyback activity has restarted. The refined product tanker sales paid off secured debt of $20.9 million, boosted cash by $20.9 million and released restricted cash of $3.2 million. With a higher cash balance, the Sankaty debt of $25.8 million was paid off on May 21st. As a result, total debt of $66 million has been paid off in 1H2021.Given the strength in the dry bulk market, net debt should drop into the $115.6 million range by yearend 2021.Dry bulk market thesis intact. The order book and supply growth remain historically low due to rate volatility, regulatory uncertainty and declining capital availability, while demand should rebound on the back of global stimulus packages and solid secular minor bulk trends. The Baltic indices have pulled back recently, but we remain constructive on the 2H2021 outlook. The sharpest weakness has been seen on the Cape market, which has dropped for the past four weeks, whereas the Supra market have been more resilient and recovered, probably attributable to more diverse cargoes.Maintain Outperform rating and increasing 12-month price target to $12.50/share from $10.00/share. A high quality asset base, consistent TCE rate outperformance and simplified corporate structure are positives, in addition to the firmer dry bulk market. After a challenging 2020, the stock has rebounded and doubled this year in response to a firmer dry bulk market. Even though the stock is off to a solid start this year, we believe that the risk/reward remains attractive and a higher price target is warranted. Read More >>