Cleaves is still bullish on bulkersWritten by Nick Blenkey
In its latest weekly report, Oslo-headquartered Cleaves Securities, says it “still sees plenty of upside left” for dry bulk operator stocks. Noting that dry bulk shipping has skyrocketed since last October, the firm says it believes that “this cyclical expansionary phase could be one of the best during peacetime on our records back to 1741, spurred on by the lowest orderbook vs fleet since 1996 at least.”
- Market: The Baltic Dry Index is hovering around 11-year highs on the back of strong demand growth from China and limited supply growth. With period rates now sustainable at levels 1.5-2.0x above cash break-evens, asset prices are playing catch-up as would-be owners can actually lock in one-year ROEs of ~39-72% on their investments. The cyclical expansion is playing out similar to our longstanding expectations, and we see high fleet utilization at least until 2023E due to the lowest orderbook vs fleet on our records going back to 1996. We see our dry bulk asset price index +21% over the next two years, with our dry bulk share index lagging and potentially rising 115% over the same period.
- Investments: Asset prices have been surging so far in 2021, and we yet again revise our fair value assessments up 3-24% depending on vessel class and vintage. The biggest changes are for modern Capesizes, which is also the segment where we see the largest upside in earnings and pricing going forward.