GRIN - Grindrod Shipping (GRIN) - Secondary Offering Improves Public Market Float
Secondary offering enhances trading liquidity. Grindrod Limited, the former parent, sold 1.84 million shares last week in a secondary offering at $13.50/share pursuant to a F-3 filing dated August 23rd. While the offering was priced at a 14% discount to the previous closing price, the stock rebounded quickly and closed yesterday ~13% above the offering price. We view the offering favorably since the public market float increased to 13.1 million shares, or 68%, and trading liquidity is likely to improve.No change to current 2021-2 EBITDA estimates and variable dividend policy on horizon. Our 4Q2021 dividend estimate is $0.61/share, including cash of $0.54/share and buybacks of $0.07/share. As highlighted in recent notes, the variable dividend will consist of a combo of buybacks and cash. As of August 30th, 91,871 shares were bought back at an average $14.87/share so total dividend will include buybacks of $1.37 million ($0.07/share) and cash of $10.69 million ($0.54/share).Acquisition of remaining IVS Bulk joint venture interest of 31.1% closed on September 15th. IVS Bulk preferred shares were also redeemed and the existing IVS Bulk credit line was upsized to $23.0 million to replace working capital that funded the acquisition.IVS Phoenix acquisition and lease financing also closed. The 2019-built Ultra was acquired for $23.5 million, or at a discount due to the existing time charter. The acquisition was financed with a lease financing of $25.0 million. Purchase options on chartered in Supras/Ultras represent attractive growth opportunities.Maintain Outperform rating and price target of $27/share. A high quality asset base, consistent TCE rate performance and the simplified corporate structure are positives, in addition to the firmer dry bulk market. Even though the stock has gained 263% year to date, the stock has dropped 6% in September, which creates a favorable risk/reward profile. We view the current valuation as attractive, especially with the shift to a variable dividend policy and the latest acquisitions of the last joint venture interest and the 2019-built IVS Phoenix Ultra. Read More >>