Cape acquisition expands Cape fleet to 17. A Cape, built in 2010 in Japan, will be acquired for $34.3 million in mid-November and renamed the Dukeship. A BWTS has been installed and a survey was recently completed so uptime should be high over next two years. The acquisition also expands overall operating leverage; each $1.0k/day change in Cape TCE rates has a $5.9 million EBITDA impact.Fine tuning 2021 EBITDA estimate to $87.3 million, but increasing 2022 EBITDA estimate to $102.2 million from $97.5 million based on TCE rates of $24.5k/day. Higher opex drags down 3Q2021 results, but acquisition pushes up our 4Q2021E EBITDA to $40.3 million based on TCE rates of $35.0k/day. Visibility is limited into next year with only three Capes fixed at a TCE rate north of $30.0k/day, or forward cover of less than 20% of available days, and we have factored in some typical seasonality, but firmer 2H2021 sets a positive tone for next year.Existing cash expected to fund Cape acquisition. Acquisition likely pushes out buy backs and regular and/or special dividend into next year since retiring convert debt with a conversion price of $1.20/share remains the near-term priority. Dukeship and Worldship will be unencumbered and pro forma cash should be in the $40 million range at yearend 2021 so financial flexibility is good.Staying positive on Cape market, but expecting volatility. Cape TCE rates have moved higher and are currently in the $60.0k/day range due to firm demand based on infrastructure projects and global stimulus programs plus port congestion and coal shortages. At the same time, the order book remains muted, and the January 1, 2023 implementation of new carbon emission regulations (EEXI) could trigger slow steaming that effectively lowers supply.Maintain Outperform rating and price target of $1.85/share. As highlighted last month's virtual NDR, a larger Cape fleet and improved financial position create a more stable operating platform. While limited buy backs and dividends over the near term might disappoint some investors, refinancing convert debt remains a higher priority at the current stock price. While up 144% this year, the stock is down 9% in October and the risk/reward profile is very favorable. The fleet expansion and a bias toward time charters with indexed rates should help capture upside rate optionality and reduce financial leverage. Read More >>