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Belships: At Least Couple Of Strong Quarters Still Ahead

Belships is reporting its 2Q22 results next week and all the signals point to yet another solid report from the company. Enjoy it while it lasts should be the saying best depicting what we think of the drybulk segment now – the rates are gradually decreasing, but Belships did an outstanding job by fixing so many contracts at elevated prices. We have reservations towards the possible Ukraine port reopening, but Belships has little drive there whatsoever. Thus, with the RFR increased in our model, we reduce the TP to NOK 26/sh but reiterate Buy recommendation for the stock.

Rates are gradually decreasing, but 2Q should be strong again

The fairy tale of the drybulk rates might be coming to an end, but there should be at least several strong quarters ahead, especially when Belships managed to fix many of its fleet on elevated prices. We also saw the peer/competitor Eagle Bulk reporting very strong results and operational metrics, therefore we anticipate Belships to continue its great performance with the quarterly results next week. Of course, Lighthouse Navigation is a lot more volatile and might disrupt the figures to any direction, therefore we focus more on the Shipping segment. Note, that in our estimates we include some non-recurring costs regarding the acquisition of vessels that should occur during 2Q22 and 3Q22.

Changes in fleet and management

Since our last update Belships announced of three new vessel acquisitions and also one divestment of the oldest ship in the fleet BELPAREIL and we updated our model accordingly. This leads to a total of 31 vessel in the fleet. Not only the fleet encountered changes but the management as well with the CFO resigning after spending more than 30 years with the company, while a former VP Finance took his place.

We are not so positive towards grain restart in Ukraine

The first ships leaving the port of Odessa could have been the very strong signal that the trade routes are normalizing, but we do not believe in the easy recovery of the Ukraine grain and corn exports. With the port being bombed on the first day after reopening and knowing that there is last year’s and this year’s combined harvest to be delivered, we anticipate struggles all over the board there. Belships had not had a significant business share in the region and we are looking at the situation more as the shaping of the market itself.

We are still in favour of the Belships stock, especially after the recent weakness, as the shipping rates are still solid, while the 2Q report should be strong again. Buy is reiterated under NOK 26/sh TP.
Source: Norne Research

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