Genco Shipping & Trading (Hold, TP: USD17.60) - Solid, but no escaping...

Our cautious view on dry bulk is somewhat offset by Genco’s favourable risk profile, with low financial leverage and a sizeable discount to underlying asset values at an EV/GAV of 0.63x. However, we struggle to see any positive share-price triggers near- to medium-term, but do see material downside risk to asset valuations decoupling from underlying rates. Hence, we reiterate our HOLD and have lowered our target price to USD17.6 (17.8).

Genco Shipping & Trading (Hold, TP: USD18.20) - Valuation reflects clo...

We see clouds on the horizon for dry bulk on concerns about China import demand, with its raw-material-heavy sectors potentially facing challenges, and 15-year-high asset values in a mediocre freight market. However, we believe much of this risk is offset for Genco by its share price implying a c40% discount to asset values and prospects of a healthy long-term market balance with a still-limited orderbook. We reiterate our HOLD, but have cut our target price to USD18.2 (22.7).

Genco Shipping & Trading (Hold, TP: USD22.70) - Strong, but for how lo...

We expect the dry bulk market to soften once what we view as unsustainable demand from China normalises, as the struggling property sector becomes evident. In this scenario, we see material downside risk to the currently elevated asset values underpinning share valuations. Hence, we believe downside risks outweigh any upside potential in the medium term. We reiterate our HOLD and our USD22.7 target price.

Vermilion Compass: Weekly Equity Strategy

Mixed Signals, Reasons for Caution The S&P 500 uptrend remains intact, and the same can be said for the QQQ's. Despite a positive view of these two metrics, the aspect of of failed U.S. dollar breakdown coupled with the reversal. of the 10-year yields higher does give us pause. The S&P 500 breadth is showing signs of breadth divergence. 1.) The U.S. dollar has staged a false breakdown and is now on the cusp of a reversal. A decisive close through last Friday's close of 104.89 could yet negate t...

Genco Shipping & Trading Minor model adjustments

We have updated our estimates, owing to the Q1 report and the guidance. We have raised our 2024e adj. EBITDA by 4%, but remain cautious on the medium-term outlook for dry bulk. Genco’s moderate cash-breakeven rate and conservative 8% market-adjusted leverage partly shield it from potentially deteriorating freight markets. Its financial flexibility could allow for through-the-cycle distributions and potential accretive transactions. However, on elevated asset values, we find Genco fairly valued (...

Vermilion Compass: Weekly Equity Strategy

Major Risk-On Developments; Bullish Outlook Intact Over the past two weeks we have discussed the possibility that further downside was limited (4/23/24 Compass) and the mounting evidence that suggests the lows may be in for this pullback (4/30/24 Compass). Major risk-on developments for the broad equity market have continued to roll in over the past week, which we discuss below. As a result, we continue to believe the lows are in for this pullback, and we see the pullback to the 100-day MA on t...

Genco Shipping & Trading (Hold, TP: USD22.60) - Risk/reward deteriorat...

While we believe Genco remains a discounted entry into dry bulk exposure at a P/NAV of 0.77x, the recent share price rise and freight market strength have put more focus on the downside risks to our dry bulk sector outlook. Genco is set for a solid first half of the year on our estimates, but we find the risk/reward less attractive medium-term. Hence, we have downgraded to HOLD (BUY), but raised our target price to USD22.6 (22.5).

Vermilion Compass: Weekly Equity Strategy

Are the Lows "In" for this Pullback? While we are not yet out of the woods, we continue to see evidence that suggests the lows may be "in" for this pullback. Last week (4/23/24 Compass) we discussed the possibility that further downside was limited on the S&P 500 due to a multitude of reasons (SPX had simply filled 2/22/24 gap support that we had been discussing since late-February, Russell 2000 and Equal-Weighted S&P 500 were holding above key supports, short-term oversold conditions, subdued ...

Yard response and dry bulk qualms

Our trip to South Korea and China revealed Chinese shipbuilders are seeking growth to take on Korea’s established yards who are facing constraints. An eagerness to add capacity is one of our takeaways, as well as a gloomy outlook for Chinese real estate, which in our view should inevitably weigh on dry bulk demand.

A brewing challenge for the yards

Our 17th Annual Energy & Shipping Conference was well attended by investors and industry executives showcasing the still-growing interest for the sectors. Limited yard capacity is fuelling high newbuilding prices and raising freight rate expectations for the vast fleet renewal necessary in the coming decade. Long lead times underpin a bullish supply story for much of shipping in the coming years, albeit exposed to geopolitical risks affecting trade patterns. Our overall impression was general op...

Genco Shipping & Trading (Buy, TP: USD22.50) - Consistent market stren...

We still believe Genco offers an attractive entry into dry bulk exposure, with its material NAV discount (P/NAV: 0.76x) offsetting what we see as elevated vessel values. The current dry bulk markets are staying firm against the risks of easing import demand growth in China on subdued economic indicators and elevated coal stockpiles. Strong forward freight agreements (FFAs) provide comfort to revenues and cash flow near-term, while the long-term investment case remains intact, in our view. We rei...

Genco Shipping & Trading (Buy, TP: USD20.70) - Bulkers at a considerab...

We believe Genco offers investors an attractive entry into dry bulk exposure, with its material NAV discount offsetting what we see as elevated vessel values in light of modest prevailing TC rates. We reiterate our BUY and have raised our target price to USD20.7 (19.0).

Vital Signs: Actionable charts

In this product we rank the most positive and negative domestic stocks, filter the symbols by market-cap and trading volume, and then divide the companies into sectors and groups. We then manually look through charts leadership/changes, bottoms-up/top-down ideas, short-term patterns that may have long-term significance, etc. We believe you will find this product valuable as significant price and relative moves begin in the daily charts.

Genco Shipping & Trading (Buy, TP: USD19.00) - ~70% upside to 1.0x P/N...

The market is offering discounted access to Genco’s relatively vintage fleet, with low cash breakeven from modest financial leverage, high operating leverage and substantial dividend power, reflected in the stock’s ~70% upside potential to 1.0x P/NAV. We reiterate our BUY and have raised our target price to USD19.0 (18.7).

Burdened by a sluggish economy

We reiterate our BUYs on all our dry bulk names, but catalysts for a marked re-pricing of the stocks now appear further out. In our view, valuation and risk/reward remain attractive, but potential negative earnings revisions and an uncertain outlook should cloud the sector into 2024e. However, we see meaningful upside potential if Chinese growth accelerates and a solid supply side lends support.

Genco Shipping & Trading Minor model adjustments

We have updated our estimates, owing to Genco’s Q2 actuals and fixtures Q3-to-date, and we do not consider these changes to be material. Rates have turned down on soft volumes (excluding China), decent supply growth and easing congestion, which may adversely pressure vessel values until rates recover on currently favourable supply-side fundamentals. Meanwhile, we believe Genco’s 0.71x EV/GAV implies a 5-year Capesize value of USD33.3m (versus the current USD47.5m and all-time low from 2015–2016 ...

Genco Shipping & Trading (Buy, TP: USD25.20) - Dreary markets, but sti...

We have cut our H2e as spot rates have disappointed and the outlook remains cloudy. However, we continue to view Genco’s 0.70x EV/GAV as attractive, implying a 5-year Capesize value of USD33.3m versus the current USD47.5m and all-time low from 2015–2016 of USD23m. At the time, demand growth averaged below 4% p.a. and the orderbook was ~20% of the fleet, versus the current ~6% YTD run-rate and 7.4%, respectively. The effects of this should counter potential demand shortfalls from a near-term soft...

Genco Shipping & Trading Minor model adjustments

We have updated our estimates on Q1 actuals, QTD fixtures and revised fuel spreads. We do not consider these changes to be material, and we have not changed our BUY recommendation. We continue to see skewed risk/reward dynamics, with 90% upside to 1.0x NAV (105% upside to our target price) and material return potential, with a 2023–2025e dividend yield of c25%. More importantly, we calculate 10% downside risk if asset values fall to record-low (March 2016) levels one year forward. We calculate m...

Northern Lights

Genco Shipping & Trading (Buy, TP: USD27.10) - Undervalued gem in dry ...

We see 60%+ upside potential to our target price, as we view Genco as materially undervalued at 3.3x 2023–2025e EV/EBITDA, versus peers at c5.0x. The stock is trading at a 30% discount to steel values, which screens as an attractive entry point given the long-term prospects of the dry bulk space, fuelled by the record-low orderbook-to-fleet ratio, encouraging demand newsflow from China, and latent upside to ROW imports. We reiterate our BUY, but have trimmed our target price to USD27.1 (27.4).