Dry bulk shipping charter rates likely to increase further next year ” Mavrinac said
I do not know if Mavrinac is a pumper or he believes his word ,maybe he is right.Future will tell.############### Dry bulk shipping charter rates likely to increase further next year ” Mavrinac said DryShips Rides Higher In Water Ruthie Ackerman, 12.18.07, 8:09 PM ET Investors seemed to be of the mind Tuesday that DryShips was oversold. Shares in the Greek dry bulk shipping company bounced back 9% a day after a 14% slide precipitated by its announcement that it had agreed to acquire a 30.4% stake in Norwegian offshore drilling contractor Ocean Rig ASA for $405 million. (See: " DryShips Dives Into Offshore Drilling")
With its shares off 45% in the last six weeks, Jeffries & Company analyst Doug Mavrinac said he believes that DryShips is extremely oversold, especially given the current strength in dry bulk charter rates and robust forecasts for 2008 and 2009. He said he would have preferred that the company not buy into Ocean Rig and instead use its surplus cash flow to acquire additional vessels, pay down debt, repurchase shares or increase dividend payments. But he pointed out that DryShips has the most operating leverage in the dry bulk sector.
Mavrinac highlighted that DryShips shares are now trading at a modest 3.6 times their estimated 2008 earnings per share.
DryShips shares rose 8.7%, or $6.31, to close at $78.49 Tuesday.
“With dry bulk shipping charter rates likely to increase further next year, we believe our current estimates could actually prove conservative,” Mavrinac said.
Mavrinac reiterated his “buy” rating and his price target of $160 per share.
Dahlman Rose analyst Omar Nokta was more negative on DryShips' acquisition of a stake in Ocean Rig. Although the deepwater drilling sector is plainly lucrative, he said he was not sure how DryShips CEO George Economou’s plans to grow Ocean Rig will benefit DryShips.
However, Nokta added that he believed DryShips' core business was still strong and estimated that it can generate more than $20 per share in cash flow in 2008. “The problem for us is DryShips shares may trade at a further discount due to investor uncertainty on capital allocation,” he said.
Nokta reiterated his “buy” rating, citing strong fundamentals in the dry bulk sector, but said he’s lowering his price target to $100 per share from $150, which reflects the discount he thinks the shares will receive.
Cantor Fitzgerald analyst Natasha Boyden emphasized that the transaction was not an indication that the dry bulk industry itself is beginning to soften.