Belships: Not only amazing results, but also improved outlook and new contracts

Belships issued a superb 4Q23 report this morning. Both the Lighthouse Navigation and the Shipping segment beat our EBITDA expectations significantly and the results from top to bottom were outstanding in this environment. With three index-linked contracts the company improved the percentage of contract-covered vessels and, following the drybulk supply/demand situation and FFA indications, it might seem that the dip in drybulk segment is over already. Our estimates will be upped and Buy is very likely to be reiterated.

Our estimates beat top to bottom

In 4Q23 the Baltic Supramax index averaged more than USD 14k/d, significantly up from USD 10k/d in 3Q23. This led to not only strong Lighthouse Navigation performance, which thrives in growing rate environment, but also stronger than expected Shipping segment figures. The average quarterly EBITDA over the last 5 years of LHN was USD 8.2m and it was beat this quarter with USD 9.6m reported. Solid cost control let the company report USD 31.2m EBITDA from Shipping segment, 14% higher than predicted by us. Obviously, this led to stronger dividends than expected – NOK 0.6/sh will be delivered.

Increased contract coverage

Belships has entered into agreements to charter out three Ultramax vessels on index-linked contracts for periods of minimum one year each. The vessels will earn a premium of between 116-120% of the Baltic Supramax Index. With improved contract coverage, currently the company has 81% of 1Q24 days covered at USD 17k/d rate and respectively 42% days of 2Q24 covered at USD 16.3k/d average rate, 28% days of 3Q24 at USD 16.5k/d and 21% days of 4Q24 at USD 16k/d rate. Furthermore, the rates showed a solid growth at the beginning of this year already and are anticipated to stay at elevated levels – the Forward Freight Agreements indicate a market average of around USD 17k/d for Ultramax bulk carriers for 2-4Q24.

Following a strong report and improved outlook, we will make upward adjustments to our estimates, while Buy is likely to be reiterated.

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Source: Norne Research