Friday, November 11, 2022
Genco Shipping & Trading Limited, incorporated on September 27, 2004, transports iron ore, coal, grain, steel products and other drybulk cargoes along shipping routes through the ownership and operation of drybulk carrier vessels. The Company is engaged in the ocean transportation of drybulk cargoes around the world through the ownership and operation of drybulk carrier vessels. As of December 31, 2016, its fleet consisted of 61 drybulk carriers, including 13 Capesize, six Panamax, four Ultramax, 21 Supramax, two Handymax and 15 Handysize drybulk carriers, with an aggregate carrying capacity of approximately 4,735,000 deadweight tons (dwt). Of the vessels in its fleet, 15 are on spot market-related time charters, and 27 are on fixed-rate time charter contracts. As of December 31, 2016, additionally, 19 of the vessels in its fleet were operating in vessel pools.
Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Locking in shipping rates when prices were high is paying off. Genco reported revenues of $136 million for the 2022-3Q. While revenues were below 2021-3Q levels of $155 million, they were close to 2022-2Q levels and our expectations. TCE rates were $23,624 down slightly from the previous quarter due to lower spot rates, but reflective of management’s strategy of locking in rates for roughly 75% of shipping days. With spot rates now having fallen below $15,000, such a strategy is proving to have paid off.
Costs are rising but shipping rates are still well above Genco’s break-even point. Genco, like most of the industry, is facing higher costs as labor, steel, and fuel costs rise. That said, shipping rates (even lower spot rates) are well above Genco’s break-even point of roughly $9,000/shipping day. The company continues to generate large significant free cash flow which it has used to reduce debt ($261 million since 2021) and pay a dividend ($2.74 per share in the last four quarters). Free cash flow will most likely decline in future quarters, but should be ample enough to continue to reduce debt and pay a dividend.
This Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.