Deutsche Bank believes Greek owner Star Bulk Carriers could enjoy a $300m surplus cash flow from its scrubber programme.
Analysts led by Amit Mehrotra hosted investor meetings in New York on Wednesday with president Hamish Norton and co-CFOs Christos Begleris and Simos Spyrou.
The bank said the listed company uses 1.2m tons of fuel per year, translating to $300m of surplus cash flow annually at the current $240 per ton spread between low and high sulphur fuel.
Returning this cash to shareholders appears to be the first step in bosses' broader vision for the company, Mehrotra added.
"Sustainable and noteworthy dividends should allow for shares to continue moving higher relative to net asset value, ultimately allowing SBLK to earn a perpetual capital base to deleverage from today’s very manageable 50% LTV level to zero net debt, bring down breakeven levels (from today’s very attractive $11,200 per day including debt repayment), and consolidate the market via highly accretive ship-for-share deals," he said.
Analysts came away from the meetings believing Star Bulk will maintain its discipline on dividend payments.
Discipline needed
"While we remain bullish on the outlook for SBLK shares, our positive takeaways from today’s meetings are more related to management’s capital allocation priorities," Mehrotra said.
"Specifically, we believe management will be disciplined, choosing to allocate surplus cash flow (ie. above debt service and repayment) towards dividends within a framework/formula that is variable and sustainable."
Deutsche Bank said this could start as early as the first half of next year.
The company is tipped to become a platform for profitable and sustainable growth in shipping, "something that had not existed in over a decade," the bank added.
It has maintained a buy rating on the stock.
