GRIN - Grindrod Shipping (GRIN) - Strong 1H2021 Results and Impressive 3Q2021 Forward Cover
1H2021 Results Above Expectations. Reported adjusted 1H2021 EBITDA of $62.5 million was a sharp improvement over 1H2020 EBITDA of $29.8 million on strong dry bulk TCE rate performance. Adjusting for IFRS 16 adoption, we calculate that adjusted EBITDA was $55.2 million in 1H2021, or more than double adjusted EBITDA of $22.1 million in 1H2020. Handy TCE rates were $15.3k/day and Supra/Ultra TCE rates were $17.6k/day, and there was an upward bias evident over first half, with 2Q2021 TCE rates up ~50% versus 1Q2021. Quarterly reporting begins in 3Q2021.Call with management today at 8am EST. Number is 877-553-9962 and code is Grindrod. Consistent with recent comments, we believe that management will offer a positive view on the rest of the year, discuss growth initiatives and highlight the decision to initiate a quarterly dividend. The targeted payout is 30% of adjusted net income, or a base dividend of $0.03/share plus a combo of added cash and/or stock buybacks.Increasing 2021 EBITDA estimate to reflect 1H2021 results and 3Q2021 forward cover. Given the firm dry bulk market and impressive forward cover, we are increasing our 2021 EBITDA estimate to $125.0 million from $108.0 million. Visibility is solid into 3Q2021 with 3,012 days fixed at ~$28.3k/day. Handys have 1,326 days fixed at $25.2k/day, up from $18.1k/day in 2Q2021, and Supra/Ultras have 1,686 days fixed at ~$30.7k/day, up from $21.9k/day in 2Q2021.On top of the attractive move to acquire IVS Bulk joint venture interest of 31.1% for $46.3 million, a purchase option on the IVS Phoenix, a 2019-built Ultra, has been exercised for $23.5 million. The moves effectively expand the fleet by ~4.7 vessels at attractive prices and eliminate the last jv interest. IVS Bulk transaction will be funded with a $25.0 million lease.Maintain Outperform rating and 12-month price target of $18.25/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 the stock has rebounded from recent weakness and gained 199% this year, we believe that the risk reward profile remains attractive, especially with the new dividend policy and the latest acquisitions of the last joint venture interest and the IVS Phoenix Ultra. Read More >>