Belships reports its 1Q22 results next week. We were expecting the Ukraine-Russia war to have a more significant impact to the shipping rates due to Ukraine being top grain exporter, nevertheless, see the rates being resilient. Following the guidance, 1Q22 figures should be strong, while all the contracts signal for at least a couple of years in the prime for the company. FX movement also impacted the Target Price which was increased to NOK 25/sh and we upgrade the recommendation to Buy seeing the upside for the stock.
Commercial update released
Over the last couple of quarters, it was almost impossible to estimate the Lighthouse Navigation segment and the company decided to issue a commercial update, stating that the aforementioned segment had an EBITDA of USD 16m in January-February 2022. We have increased our estimates somewhat, also adjusted for the TCE rate guidance of around USD 23,900 net per vessel per day in 1Q22. Overall, we still seem a bit more cautious towards the numbers compared to the consensus, but even if our anticipated figures are reached, this would mark yet another strong quarter.
Ukraine – no direct impact, but surely could not be ignored
Ukraine has been top exporter of corn and grain by sea before the war with Russia emerged. Although Belships communicated not to be directly affected by the conflict – with no vessels or cargo contracts there – the potential negative consequences are worrisome with energy shortages and inflationary pressure in the picture together with the humanitarian crisis. Nevertheless, before the war started, some analysts were expecting a crucial impact for the drybulk shipping, namely the rates dropping like a stone, and we were more cautious, stating that the impact should not be as harsh. What we could not have guessed is that the rates showed to be resilient and they even managed to increase somewhat.
Fleet expansion and new contracts
Belships has entered into agreements for the acquisition of two modern 64,000 dwt Ultramax bulk carriers built at Japanese shipyards in 2019 and 2020 and will pay a total of USD 12.0m as a downpayment upon delivery. The vessels come with charter contracts for 2.5 years @ USD /d each and have the options for two additional years @ USD /d and USD /d gross rates respectively. This increased the fleet to 29 carriers when fully delivered. A couple of months ago Belships entered into another agreement for around 2 years @ USD /d gross rate.
Extraordinary dividends for 1Q coming
There will be an extraordinary dividends announced with the 1Q22 results and we anticipate NOK 1/sh in addition to the ordinary 50% of net profit, which are aimed to distribute quarterly. All in all, the upcoming quarters and years should be very solid for Belships and with the Ukraine-Russia conflict having minimal impact for the rates, we upgrade our recommendation to Buy following the increased NOK 25/sh Target Price and again seeing the upside for the stock.
Source: Norne Research
