Safe Bulkers (Buy, TP: USD6.40) - Softer 2023e earnings outlook
The dry bulk earnings recovery has likely been delayed by a weaker macroeconomic outlook and a sluggish Chinese recovery, but Safe Bulkers’ 56% forward cover for the rest of 2023 (2024: 24%) leaves it reasonably insulated relative to more spot-exposed peers. The strong rate backlog, which we value at cUSD115m, or c14% of our USD7.4/share NAV (0.44x P/NAV), translates into a 30% discount to steel values in our NAV, in our view implying a still-favourable risk/reward to a brewing dry bulk market recovery. We reiterate our BUY but have cut our target price to USD6.4 (6.6).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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