Sages buoy Genco splash

A trio of equity analysts have given a thumbs up to Genco Shipping & Trading's sixteen-ship spending spree.

Justin Yagerman of Deutsche Bank lead the pack in sending an email alert to clients Friday morning, in a message highlighting the finer points of New York-listed Genco's $545m bulker buy.

In a note time-stamped at 9:58 am, the analyst's note was capped with a "buy" rating.

"We view GNK's purchase as a signal of management's continued confidence in the future of the dry bulk market in the face of prevailing macro concerns over China's slowdown," wrote Yagerman.

"Given the recent drop in the BDI [Baltic Dry Index], we view this as contrarian call in the current market, however, we note Genco's purchase of supramaxes is likely indicative of a desire to obtain more flexible vessels that have optionality both in cargo and geography beyond the scope of the larger and more limited panamax and capesize classes," he added.

According to TradeWinds' Shipping Index, Genco shares gained momentum shortly after the announcement, hitting $15.62 at around 10:15, before falling marginally to reach $15.24 an hour later.

But shares came back, reaching $15.44 when TradeWinds first laid its eye's on Natasha Boyden's midday note.

"While we are encouraged by the company's experienced management team and highly modern and diverse fleet, we suggest the stock is fully valued in relation to our charter-adjusted net asset value estimate of $12.47 per share," Cantor Fitzgerald's analyst wrote, adding: "We look for 2011 earnings to come down as above-market charters roll off and are replaced with charters at current market rates."

Boyden maintained her "hold" rating, but raised her 2010 earnings per share (EPS) estimate to $4.33, up from $4.09 and her 2010 EBITDA estimate to $312m from $289m.

The analyst was careful to warn clients that the figures did not account for the possibility of a Genco equity issuance.

As TradeWinds has reported, Genco plans to finance the acquisition of these vessels using bank debt for approximately 60% of the purchase price, cash on hand, and up to $150m of capital markets financing in the debt, equity-linked and equity markets. Three of the units will be offloaded to Maritime Equity Partners upon delivery.

Scott Burk of Oppenheimer & Co made a point to address the equity question.

"We assume the company issues 4.9 million shares at the current price for the equity financing component," he told clients in a message sent this afternoon.

The analyst put a $75m pricetag on the potential offering and he held on to his "outperform" rating.

Shares in New York-listed Genco closed at $16.13 to wrap up a wild ride on Wall Street.

Printable version Newsletter sign up