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Genco Shipping & Trading Ltd. Message Board

  • ex_hacker202 ex_hacker202 Feb 28, 2011 12:26 PM Flag

    Seeking Alpha GNK article update

    The author of that SA GNK analysis I posted about here re-ran his model using the updated charter list, below is his response:

    "Q4 earnings were inline with what I expected (inline/slight miss with the street as well). GNK (not including Baltic) ended the quarter with $245m of cash and $1.6 billion of debt, so $1.355 billion of net debt. If we include the par value of the convertible notes the Company’s net debt at the end of the quarter was $1.38 billion of net debt, this compares to the net debt figure I have in my analysis above of $1.4 billion, so my balance sheet estimates were very close.

    On the charter list update, the Company has continued to fix its expiring vessels onto index-linked charters. As a reminder, an index linked charter means these ships are earning around 100% of spot rate. So, for example, GNK has 3 of its Capesize vessels on index linked charters (one at 100%, the other 2 at 98.5%). So these ships are currently earning about $4,600 per day. GNK now has 22 out of its 49 vessels operating on index linked charters or operating in the spot market. GNK has chosen to do this because they are anticipating a sharp rally in shipping rates in the back half of the year (or sooner). So I think this is a very important point about GNK. There should be no disagreement here, GNK is a levered, spot exposed Company. So to the extent you have a very bullish view on freight rates, then GNK’s strategy is a good thing and you should be long the Company. To the extent you have a negative view on freight rates (as I do) GNK is a short.

    As another reminder, I don’t think Cape rates will remain under $5k per day. Instead, I run my models at the current 1-year time-charter rate. As of today, those rates are as follows:

    Capesize: $17,000
    Panamax: $17,500
    Supramax: $15,500
    Handymax: $13,250
    Handysize: $11,750

    Using these rate assumptions, which for Capes are over 3x current spot rates, I show GNK trading at a non-meaningful PE figure for 2012 and 9x EV to EBITDA. I also show them at over 6x net debt to EBITDA"

    ****Ironically, TDAmeritrade just upgraded GNK from reduce to hold this morning, have no idea WTF their analysts are looking at or thinking! I'll check their website and see who exactly upgraded GNK and why - TDA combines the opinions of multiple analysts to come up with guidance, so one or more of them must have upgraded GNK individually. I'll head over there now and see what's up, will post what I find.*****

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