{"id":56497,"date":"2023-09-03T15:58:06","date_gmt":"2023-09-03T19:58:06","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/star-bulk-carriers-improved-balance-sheets-trigger-handsome-dividends-nasdaqsblk\/"},"modified":"2023-09-03T15:58:10","modified_gmt":"2023-09-03T19:58:10","slug":"star-bulk-carriers-improved-balance-sheets-trigger-handsome-dividends-nasdaqsblk","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=56497","title":{"rendered":"Star Bulk Carriers: Improved Balance Sheets Trigger Handsome Dividends (NASDAQ:SBLK)"},"content":{"rendered":"
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<\/picture>
<\/figcaption><\/figure>\n<\/p>\n

SBLK’s Dry Bulk Investment Thesis Remains Viable, Despite The Normalized TCE Rates<\/strong><\/h2>\n

We previously covered Star Bulk Carriers (NASDAQ:SBLK<\/span>) in May 2023, discussing its mixed prospects thanks to China’s uncertain iron ore demand recovery.<\/p>\n

While we might have rated the stock as a Buy, we had also cautioned investors that the economic downturn was unlikely to lift in the near term, with the volatile TCE rates likely to trigger underwhelming variable dividends.<\/span><\/p>\n

For now, SBLK reported FQ2’23 TCE rates of $15.83K (+11.5% QoQ\/ -48% YoY), improved compared to its dry bulker peers thanks to its fully scrubber-fitted vessels.<\/p>\n

For example, Genco Shipping (GNK) reported FQ2’23 average TCE rates of $15.55K (+11.5% QoQ\/ -45.9% YoY) and Eagle Bulk Shipping Inc. (EGLE) at $14.43K (+11.7% QoQ\/ -52.2% YoY).<\/p>\n

While SBLK naturally lags behind Golden Ocean Group Limited’s (GOGL) FQ2’23 TCE rates of $17.66K (+18.3% QoQ\/ -39.9% YoY), we are not overly concerned, since the former operates with a much older fleet at 11.4 years, doubled compared to the latter at 6.9 years.<\/span><\/p>\n

Dry-Bulk Market Rate<\/strong><\/p>\n

\n

\"Dry-Bulk<\/span>
\n

Alibra Shipping Ltd<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

In addition, SBLK has been able to command a much higher preliminary FQ3’23 average TCE rates of $14.65K, comprising $20.10K for Capesize (-2% QoQ\/ -20.8% YoY), $13K for Panamax (-2.6% QoQ\/ -40.7% YoY), and $11.50K for Supramax (-19.4% QoQ\/ -56.2% YoY).<\/p>\n

These numbers are stellar indeed, compared to GNK’s average contracted FQ3’23 TCE rates of $12.26K, EGLE at $10.90K, and GOGL at $18.3K for Capesize\/ $13.51K for Panamax.<\/p>\n

Even if we are to compare SBLK’s next quarter rates to the industry averages of $14K for Capesize as of August 30, 2023, it is apparent that we may still see the company bring forth excellent FQ3’23 results.<\/p>\n

This is attributed to the management’s stellar cost control, with market leading daily OPEX per vessel of $4.91K (+1.2% QoQ\/ -1.9% YoY) in FQ2’23. This is compared to GNK at $5.64K (-8.4% QoQ\/ -23.2% YoY) and EGLE at $5.88K (-8.1% QoQ\/ +5.3% YoY), with GOGL’s number not reported.<\/p>\n

Due to the outsized top-line and highly efficient operations, it is unsurprising that SBLK has been able to report excellent adjusted EBITDA of $96.18M (+13.4% QoQ\/ -63.2% YoY) and EBITDA margin of 40.2% (+2.4 points QoQ\/ -21.6 YoY).<\/p>\n

This is compared to GNK’s adj EBITDA margin at 33.3%, EGLE at 24.4%, and GOGL at 37.6% at the same time.<\/p>\n

However, SBLK investors must also calibrate their expectations since we do not expect to see the hyper-pandemic rates occur again, due to the easing of the global supply chain. The dry bulk TCE rates are likely to stabilize at these levels moving forward, nearing its pre-pandemic levels.<\/p>\n

SBLK’s FY2019 Performance<\/strong><\/p>\n

\n

\"SBLK's<\/span>
\n

Seeking Alpha<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

As a result of its normalization cadence, SBLK investors may want to refresh their memories of the company’s previous FY2019 financial highlights.<\/p>\n

Observant investors may note that its FQ2’23 TCE and daily OPEX per vessel rates are not too far off from the FY2019 levels indeed. At the same time, its long-term debt has already been moderated to $779.09M (-10.4% QoQ\/ -17.1% YoY\/ -42.6% from FQ1’20 levels of $1.35B).<\/p>\n

Despite the sustained fleet renewal, the SBLK management has also been able to repurchase $33.13M of shares since FQ2’22, keeping its shares outstanding count stable.<\/p>\n

With the dry bulker’s balance sheet in much better shape post hyper pandemic windfall, we believe investors may still look forward to excellent payouts ahead, thanks to its improving profitability.<\/p>\n

For example, based on SBLK’s FQ2’23 EPS of $0.43 and variable dividend of $0.40, we are looking at an approximate payout ratio of 93% and annualized yield of 9% based on the stock price of $17.62 at the time of writing.<\/p>\n

Compared to the FY2019 payout ratio of 19.2% and dividend payout of $0.05, the payout improvement is highly encouraging indeed.<\/p>\n

So, Is SBLK Stock A Buy<\/strong>, Sell, or Hold?<\/strong> <\/h2>\n

SBLK 3Y Stock Price<\/strong><\/p>\n

\n

\"SBLK<\/span> <\/picture>
\n

Trading View<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The SBLK stock also remains well supported at the $17s suggesting an improved margin of safety for those looking to add, especially due to the improved dividend yield compared to GNK at 4.39%, EGLE at 5.3%, and GOGL at 5.47% at the same time.<\/p>\n

SBLK 3Y Total Returns Including Dividends<\/strong><\/p>\n

\n

\"SBLK<\/span> <\/picture>
\n

Trading View<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Combined with the SBLK stock’s improved returns of +128.28% including dividends since the start of 2020, we remain confident about its future prospects.<\/p>\n

Naturally, we must highlight that the dry bulker sector remains highly cyclical and therefore, volatile, since the global economic\/ geopolitical activities dictate the global demand for commodities and consequently, its fleet utilization.<\/p>\n

10Y Baltic Dry Index<\/strong><\/p>\n

\n

\"10Y<\/span> <\/picture>
\n

Trading View<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

However, with the global economy currently already at its down cycle, we believe that there is an excellent upside to the intermediate-term demand recovery for dry bulk commodities, once the global macroeconomic outlook lifts and elevated interest rate environment normalizes.<\/p>\n

For example, the Baltic Dry Index has already rebounded from its bottom and returned to its pre-pandemic trading range of between 500 points and 1,500 points over the past few months.<\/p>\n

As a result of the highly attractive risk reward ratio, we continue to rate the SBLK stock as a Buy here.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

SBLK’s Dry Bulk Investment Thesis Remains Viable, Despite The Normalized TCE Rates We previously covered Star Bulk Carriers (NASDAQ:SBLK) in May 2023, discussing its mixed prospects thanks to China’s uncertain iron ore demand recovery. While we might have rated the stock as a Buy, we had also cautioned investors that the economic downturn was unlikely […]<\/p>\n","protected":false},"author":1,"featured_media":56498,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-56497","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nStar Bulk Carriers: Improved Balance Sheets Trigger Handsome Dividends (NASDAQ:SBLK) | iFintechWorld<\/title>\n<meta name=\"description\" content=\"SBLK's Dry Bulk Investment Thesis Remains Viable, Despite The Normalized TCE Rates We previously covered Star Bulk Carriers (NASDAQ:SBLK) in May 2023,\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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