Tag - Shipping

Comparative advantage can be readily witnessed in specific country output: Germany, beer; France, wine; Switzerland, watches; United States, media; Colombia, coffee. And then there's Greece, which has long demonstrated a persistent comparative advantage in bulk-ocean shipping. It's an advantage we expect Athens-based Star Bulk Carriers Corp. (Nasdaq: SBLK), a major transporter of iron ore, coal, grains, bauxite, fertilizers and steel products, to perpetuate well into the relevant future.  

Star Bulk is a newbie to both the world's shipping lanes and the U.S. equity markets. The company, incorporated in the Marshall Islands on Dec. 13, 2006, and is the product of its Nov. 30, 2007, merger with Star Maritime Acquisition Corp., a special-purpose acquisition company, leaving Star Bulk as the stand-alone entity. It subsequently received Nasdaq-listing approval, with trading commencing Dec. 3, 2007.

In its new form, Star Bulk operates a fleet of eight dry bulk carriers, and has a definitive agreement to acquire two dry bulk carriers. The fleet consists of three capesize, one panama and six supramax dry bulk vessels, with an average age of 11 years and a combined cargo carrying capacity of 927,800 deadweight tons. Vessels are classified into four categories based on their carrying capacity in deadweight tons: handysize (10,000-39,999 DWT), handymax/supramax (40,000-59,999 DWT), panamax (60,000-99,999 DWT) and capesize (higher than 100,000 DWT).

Last week, Star Bulk reported its first public financial statements. Net income posted at $1.61 million, or $0.05 per share for the fourth quarter, compared with $620,000, or $0.02 per share, in the same quarter last year, on reported total revenue of $3.69 million. But since Star Bulk is such a different animal compared to last year, the numbers are essentially meaningless.

TOP Tankers Inc. (Nasdaq: TOPT)
Maroussi, Greece
 
52-week low / high: $3.15/$8.40
Shares Outstanding: 37.38 million
Market Capitalization: $159 million

Calling all value investors. You might be interested in a little Greek international shipping company called Top Tankers Inc. (Nasdaq: TOPT). Aside from operating in what could be the most promising sector for 2008 (drybulk), the company is deeply undervalued.

The transporter of refined petroleum products, crude oil and other commodities trades at a discount to the industry. On a trailing price-to-earnings basis the company trades at 6.58 times, compared with 14.38 for the industry group. On a forward P/E basis, the small cap currently trades at a cheap 8.8 times.

Aside from valuation, another metric value investors look for are strong fundamentals. On a fundamental basis, the company currently remains a watch as it’s not fundamentally sound. For the nine months ended Sept. 30, 2007, the company careened to a net loss of $11.64 million, or $0.34 per share, compared with net income of $11.93 million, or $0.37 per share, for the nine months ended Sept. 30, 2006. Revenue for the nine months ended Sept. 30, 2007 sunk 17% to $200.47 million from $242.25 million for the first nine months of 2006.

Shares of Paragon Shipping Inc. (Nasdaq: PRGN) have sailed to a new 52-week high on news before the start of trading that the Greek sea transportation company will acquire two new carriers.

The “Coral Seas” has a capacity of 74,477 deadweight tonnage (dwt) and can be hired for $54,000 per day for a period of 23 to 25 months. The “Golden Seas” has a capacity of 74,475 dwt and can be hired for $64,000 per day for a period of 11 to 13 months. The two vessels, which cost a total of $178 million, will be delivered between November and December 2007.

“We are pleased to announce the further expansion of our fleet by the addition of these two modern Panamax vessels,” said chairman and CEO Michael Bodouroglou in a statement. “These latest acquisitions clearly demonstrate our strategic aim of acquiring modern vessels with secure employment for the next one to two years.”

Bodouroglou added that the purchase of the two new carriers brings the total number of vessels in Athens-based Paragon’s fleet to 11 and lowers their average age to 6.5 years. The company said that it will pay for the acquisition with bank debt under its existing credit facilities and available cash on hand.

At 3:53 p.m. ET, Paragon Shipping (PRGN) shares had gained $1.99, or 10%, to $21.44, a new 52-week high. The previous 52-week high was $19.90, achieved on Oct. 5. The 52-week low of $13.75 was reached on Aug. 16.

The transportation and logistics industries have tried to keep rolling along in 2007, even in a U.S. economy that continues to struggle at fending off the effects of the crumbling subprime mortgage market. Freight volumes are off, however, and many companies are operating with reduced expectations for 2007.

While the stocks of many companies in transportation and logistics have failed to gain much traction in recent months, including intermodal leader Pacer International (Nasdaq: PACR), it’s far from being a train wreck throughout the sector.

Based in Concord, Calif., Pacer International is a holding company that has dropped into the small-cap spectrum as its shares have lost value since February, pulling its market capitalization to around $665 million. With a gross revenue for 2006 of $1.9 billion, Pacer accounted for one-fifth of all intermodal container movement in North America and is also the largest provider of intermodal container services between the United States and Mexico.

Pacer operates in two segments: intermodal, which includes its double-decker Stacktrain and other rail services; and logistics, which provides services including warehousing and distribution. About 80% of its business comes from the intermodal segment, with the remainder coming from logistics.

For the past three years, Pacer was named to the Forbes Platinum 400 list, also called the “Best Big Companies in America.” Pacer, with a five-year total return of 15.6%, was among 17 transportation companies selected from the transportation sector for the list.

International shipping companies are benefiting from steadily increasing global trade, rising imports/exports from China and other Asian countries, and expanding global demand for oil, coal, agricultural products and other commodities that are generally shipped via ocean tankers and container vessels.

Robust growth in shipping industry volume is evidenced by the increase in container shipments bringing products into China. More than 58 million containers passed through China’s ports in 2004. This number is forecast to more than double to 120 million containers by 2010. In addition to booming China traffic, container shipments are increasing because of above average GDP growth in the U.S. western coastal states. Industry investment in expanding U.S. terminal capacity is forecast to rise 5.1% annually between 2004 and 2010.

Accelerated offshore drilling activity is heightening demand for offshore supply vessels. These vessels transport dry and liquid cargos, including drilling equipment, pipe and drilling fluids to and from the offshore site. Day rates for these vessels have risen dramatically, from approximately $15,900 per day in 2004 to $30,400 per day in 2005 and $48,600 per day in 2006. In the first few months of 2007, day rates have averaged around $53,300.

Contract rates for the large oil tankers that move oil from one country to another also benefit from rising global oil demand and the limits of a fleet consisting of only about 6,800 vessels worldwide. Oil companies own some of these tankers but the vast majority are independently owned and operated. Charter rates for the larger tankers have risen significantly due to increased long haul trade to Asia and the United States and increased U.S. imports. One-year rates rose from $24,800 per day in 2003 to peak at $34,900 in 2005. While rates have since declined to $31,000 per day in early 2007, they remain at historically high levels.

Greece-based shipping company Euroseas Ltd. (Nasdaq: ESEA), which on Tuesday reported strong growth in first-quarter earnings, expects to continue to grow its fleet, executives said on a conference call this morning.

“We are looking at growing the company,” CEO Aristides Pittas said on the call. “Our vessel purchase program continues to be active.”

Euroseas, which runs a fleet of dry bulk and container ships, is focusing its vessel acquisition efforts on middle-aged, multipurpose ships, Pittas said. The company has $10 million to $12 million available for acquisitions this year, he said. The company, incorporated in the Marshall Islands in 2005, currently operates four dry bulk carriers, six container ships and one multipurpose vessel.

On Tuesday after the close of trading, Euroseas reported revenues of $13.5 million for the first quarter ended March 31, up from $9.3 million in the same period of 2006. The company announced a $9.5 million profit, or $0.58 a share, almost three times the $3.4 million profit, or $0.28 per share, a year earlier.

Shares in the company are trading near the 52-week high of $12.37. In midday trading, Euroseas shares were up $1.42 at $12.22.