Safe Bulkers (Hold, TP: USD5.70) - Growing tension, but 0.5x P/NAV
We believe Safe Bulkers’ pricing reflects the potential downside we see for the dry bulk shipping sector, with mounting tension between mediocre freight markets and 20-year-high asset values. We remain concerned about Chinese import demand as its raw-material-intensive sectors should see further headwinds in the coming months, and despite the 0.5x P/NAV, we reiterate our HOLD and have cut our target price to USD5.7 (6.4).Safe Bulkers is an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes for consumers of marine drybulk transportation services. As of Feb. 9, 2018, Co. had a fleet of 39 drybulk vessels, with an aggregate carrying capacity of 3,513,800 dwt and an average age of 7.6 years. Co. deploys its vessels on both period time charters and spot time charters. The vessels on period time charters provide Co. with relatively stable cash flow and utilization rates, while the vessels in the spot market allow Co. to maintain its flexibility in low charter market conditions.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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