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Belships: Stronger than predicted adjusted figures, very high dividends and promising future

We are lacking positive adjectives when trying to be non-repetitive, but this was yet another strong report from Belships, especially knowing that 1Q is seasonally weaker and it almost has not felt this way. Furthermore, NOK 1.00/sh ordinary and NOK 1.25/sh extraordinary dividends were declared, much higher than we and consensus anticipated. Our estimates were upped seeing promising market fundamentals and war-resilient rates and we keep Buy recommendation at our-highest NOK 30/sh Target Price.

Very strong results for the seasonally weaker quarter

The first quarter of the year is seasonally the weakest period due to Chinese New Year and lower grain and iron ore shipments. In January we also saw Indonesia implementing the coal export ban for a couple of weeks, but as this passed, the market regained strength, and the rates climbed to USD 30k/d. The Baltic Supramax Index averaged 25,155 per day in 1Q22 and this was the highest start to a year since 2008. The freight market continues to display the advantages of the versatile Supramaxes/Ultramaxes compared to the larger vessels. Belships managed to report very strong operating income from the shipping segment of USD 54.3m (USD 52.9m expected by us), while the margins did not disappoint. Lighthouse Navigation’s EBITDA was pre-announced for the first two months of the quarter, while the month of March was strong as well and the segment delivered USD 22.6m EBITDA for the quarter (USD 20.8m predicted). Solid results brought the bottom line to USD 59.5m and dividends (around half of the results) to NOK 1.0/sh. Belships previously said that there will be extraordinary dividends as well and added NOK 1.25/sh (NOK 1.0/sh predicted by us).

Contract coverage solid, supply/demand promising

The sentiment in the market remains strong as the war in Ukraine simply adjusted the trade patterns and did not crush the drybulk shipping market as was feared by some. Surely, there are uncertainties towards the further development of the conflict, also the congestions in China related to Covid-19, but the contract coverage of Belships is more than solid. 90% of 2Q22 is covered @ USD 24.8k/d; 75% of 3Q @ USD 23.5k/d and gradually declining percentage going forward but at very solid USD 23k+ rates. Credit growth and economic stimulus are positive for the drybulk market and general consensus points towards the continued economic growth in 2022. The drybulk vessel supply is at historical lows at 6% helped by rising steel prices and high demand from other shipping segments, while the demand remains firm, thus, the longer-term prospects are very promising as well. We increased our estimates and anticipate at least 2022 and 2023 to be very strong for the company with aforementioned factors strengthening our view. This is also supported by the fact that the case is significantly de-risked with a highly profitable contract coverage. Strong USD/NOK also helps. With a higher NOK 30/sh (NOK 25/sh previously) Target Price, we keep Buy recommendation and hope to be in search of positive adjectives after several more reports.

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Source: Norne Research

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