Globus Maritime: Panamax vessel two-year fixture, Revising estimates.
Globus Maritime announced on 28 January 2010 a new two-year timecharter agreement for its panamax dry bulk carrier m.v. Tiara Globe (1998 built) with Transgrain Shipping at gross rate of US$ 20,000 per day, for a min. of 24 to a max. of 26 months starting in February 2010.
Analysis: The panamax bulk carrier m.v. Tiara Globe was previously chartered to Korea Line Corp. at a gross rate of US$ 66,000 per day for two-years beginning Dec. 2007 with earliest charter expiration date as Dec. 2009. The current announced fixture at US$ 20,000 per day is at one-third of the previous level reflecting a 66.7% decline in charter rates. Korea Line has been a noteworthy strong counter-party to the company through period of dry bulk market collapse and weakness. This fixture is higher than our forecast rates, and we assume charter to commence mid-February. Given the impending supply of dry bulk carriers, we see this as a positive move made by the company in securing revenues providing earnings visibility and stability, whilst allowing it to seek suitable opportunities for further vessel acquisitions.
The company is also due to deliver its two vessels, m.v. Coral Globe and m.v. Sea Globe in early February as per previous agreed sale. We estimate the company to repay around US$ 27m to DSB Bank as debt outstanding against these two vessels from sale proceeds. We assume the vessels to be delivered to the new owners on 1 February 2010 in our estimates.
We estimate for 2010, EBITDA (adj.) to be c. US$ 4.7m and net loss (adj.) of c. US$ 1.0m. The company will move from a position of net debt to net cash post the sale of vessels, with net cash of c. US$ 25.5m in 2010E.
Clarkson Research Services resumed publication of secondhand prices at the beginning of this year. Using the current secondhand vessel values, estimated fleet value (US$ 59m) and a net cash position post ships sale (US$ 23m), implied NAV per share of Globus is GBp 177. Whilst we note the upside available on NAV basis, pressure on asset values due to impending supply and earnings visibility are the discounting factors.
Conclusion and action:
We revise our target price upwards to GBp 125.00 from GBp 90.00 and amend our recommendation to "Accumulate" from "Buy" for Globus Maritime given the 14% upside, on the basis of net cash position and 6.5x EV/EBITDA(adj.) multiple (in line with peer group) for 2010E.