GRIN - Grindrod Shipping (GRIN) - Webcast With CEO Reinforces Positive Stance
Capital Link sponsored web cast reinforced our positive stance on GRIN and the dry bulk market. In yesterday's presentation, CEO Martyn Wade stated again that dry market fundamentals are staying better than expected and shippers remain focused on "just in case" instead of "just in time". Supply/demand fundamentals remain favorable and TCE rate performance was solid in 1H2021. 2H2021 is off to a good start and the dry bulk market remains firm. Demand has rebounded on the back of global stimulus packages and solid secular minor bulk trends.IVS Bulk joint venture interest of 31.1% acquisition for $46.3 million was very attractive move. The move effectively expands the fleet by ~3.7 vessels and eliminates the last jv interest. Pricing based on May 13th appraisal and April 30th financials, and interim improvement captured by GRIN. Combo of IVS Bulk cash, a new credit line of $23 million to redeem IVS Bulk preferred and GRIN cash after IVS Bulk preferred redemption.Maintain 2021 EBITDA estimate. Quarterly reporting starts when 2Q2021 results will be reported on August 19th. Given the firmer state of the dry bulk market and higher TCE rate assumptions, we recently increased our 2021 EBITDA estimate to $108.0 million. Limited visibility into 2H2021 due to chartering strategy, but the tone is clearly firm, with TCE rates north of $30.0k/day.Disciplined capital strategy enabled acquisition of the JV interest and a dividend and/or stock buybacks seem likely. Given higher operating cash flow, the JV interest acquisition is very manageable using a balance of existing cash and debt. Post acquisition, a variable dividend and/or stock buybacks appear on the near-term horizon.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 this year with gains of 58% in 1Q2021 and 87% in 2Q2021, it was down 12% in July. While the stock has rebounded 7% in August, we believe that the risk reward profile remains attractive, especially following the acquisition of the last joint venture interest. Read More >>