Speaking at a Capital Link webinar Omar Nokta, from Clarksons Platou, summarized the current market as: “Shipping stocks have been on a tear the past few weeks…we haven’t seen this type of volume and interest across the board.” This draws a contrast to pockets of interest in a particular sector- such as tankers in April 2020, when floating storage pulled vessels out of the market, or LNG tankers in late 2020 as cold weather hit Asia.
Nokta stressed that shipping’s supply story in a historically low orderbook, which analysts have been pointing to for a while, is now complemented by “a resurgence in demand”. He said that, in recent years, “what’s been missing is the demand side of the equation.”
Jefferies analyst Randy Giveans explained that 2020 was “risk off” environment for investors, with the oil price war and the pandemic, saying “When the world was ending, nobody wanted anything economically sensitive”.
However, now with recovery on the horizon, he said that the fund flows into shipping have been pretty broad, noting that all 31 shipping “names” covered by Jefferies have been up “pretty meaningfully”, year to date. “You can see a lot of upside without extensive inflows, because the market capitalization of the companies is relatively small,” he noted.
Jon Chappell, from Evercore ISI, described the past few years of spikes in the shipping markets, and relating it to the present situation. He told listeners, “Now that we have that strong fundamental outlook, depending on the sector that you are looking at, I think it’s going to be a slow grind in proving that this can be a sustainable upturn.
He asked, rhetorically, “Is it really different this time, where you have a multi-year upturn?” contrasted with a series of spikes. Looking at how investors could be attracted, he said, “Then, when you have that- you’ll get broader investor appeal.” Nokta, chiming in, said “This time, it does feel quite different, to us.”
A separate webinar on dry bulk, from Cleaves Securities, also provided a bullish view on that sector, with demand ratcheting upward on a multi-year basis. Analyst Joakim Hannisdahl suggested that by 2023, the one-year time charter rate on a capesize vessel might approach $37,000 per day- bringing up asset values-which would also lift the share prices.
With share prices suddenly relatively high compared to Net Asset Values (NAV), he predicted that we could be seeing more “shares for ships” deals, a template honed by Star Bulk but with Eagle Bulk (now using their shares as currency. Eagle Bulk has recently inked such deals with the company formerly known as Scorpio Bulk and with Alterna Capital.
The analysts on the Capital Link panel said that fresh groups of investors could be attracted to shipping shares, with Nokta pointing to: “Not just value investors but growth oriented retail investors, dividend income investors”, who have been largely missing in recent years, “because there wasn’t an exciting growth story”.
With some economics prognosticators look for 5% growth, or higher, this year, maybe that’s changed. Both Capital Link and Cleaves were mentioning a recent craze, where retail investors connected through social media have lifted share prices in a buying frenzy.
Cleaves’ Hannisdahl highlighted Castor Maritime, a smallish owner of drybulk vessels, that rose rapidly in the recent mania - “it is quite baffling how small investors, cooperating through a Reddit type platform, can raise a penny stock to above $1 billion in daily turnover.”
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