Seanergy Maritime: Strong Market Conditions But Downgrade to Hold (NASDAQ:SHIP)

observe:

I used to cowl Seanergy Maritime Holdings Corp. (NASDAQ:NASDAQ: ship), so buyers ought to view this text as an replace to my earlier work on the corporate.

Final week, main dry cargo shipper Seanergy Maritime Holdings (“Seanergy” or “Seanergy Maritime”) introduced Outcomes for Q1 2024 are a lot greater consensus expectations as constitution charges remained flat throughout a traditionally weak first quarter, as administration additionally indicated within the press launch:

(…) opposite to regular seasonality, the primary quarter of 2024 was the strongest in a decade for Capesize earnings. Brazil’s iron ore exports rose about 12% year-on-year to the best since 2019, whereas seaborne coal commerce remained at very excessive ranges. A restricted order e book for vessels in recent times seems to be contributing to a gradual enchancment within the steadiness of provide and demand, whereas geopolitical uncertainty surrounding the Purple Sea disaster was additionally marginally constructive for Capesize income.

Seanergy Maritime generated $14.5 million in money circulation from operations and ended the quarter with $24.2 million in money and $223.2 million in debt (web of deferred financing prices).

The corporate declared an mixture money dividend of $0.15 per share for the first quarter:

Persevering with its quarterly dividend funds, the Firm declared a quarterly money dividend of $0.025 per frequent share for the primary quarter of 2024, payable on or about July 10, 2024 to all stockholders of report as of June 25, 2024. As well as As well as, the Firm declared a particular dividend of $0.125 per frequent share to all shareholders of report as of June 25, 2024, payable on or about July 10, 2024.

Nevertheless, the rise in payouts comes on the expense of further dilution for frequent shareholders. Yr-to-date, Seanergy Maritime offered roughly 0.6 million new shares of frequent inventory within the open marketplace for gross proceeds of $5.1 million.

Then again, the corporate additionally repurchased 0.1 million shares for a complete buy value of $0.8 million.

Seanergy Maritime continues to develop its fleet with two further Capesize purchases in 2024, in response to the corporate’s annual report on Type 20-F:

On February 5, 2024, we agreed to accumulate a 181,392 dwt Capesize bulk provider inbuilt 2013 in Japan to be renamed M/V Iconship. The acquisition value of $33.7 million is predicted to be financed via a mix of money and debt financing. M/V Iconship is predicted to be delivered between April and June 2024 (…)

On March 18, 2024, we agreed to buy a 181,396 dwt Capesize bulk provider inbuilt 2012 in Japan. The acquisition value of $35.6 million is predicted to be financed via a mix of money and debt financing. The vessel is predicted to be delivered between July and October 2024.

Because of this, the corporate’s fleet will improve to 19 ships with an estimated market worth of about $640 million:

Seanergy Maritime additionally supplied preliminary time constitution equal (“TCE”) steerage for Q2:

Relating to our Q2 2024 steerage based mostly on present FFA ranges, we anticipate our each day TCE to be roughly $26,400, doubtless outperforming the Capesize market as a result of our energetic hedging technique. Trying additional, within the second half of the yr we have now transformed about 33% of our property days to a flat each day fee of about $30,000.

Based mostly on the forecast, I anticipate the corporate’s Q2 outcomes to once more beat consensus expectations, with adjusted EBITDA of roughly $25 million, assuming no materials profit from the upcoming supply Icon portray.

After a latest rally to new multi-year highs, Seanergy Maritime’s low cost to web asset worth (“NAV”) has narrowed additional:

Apart from market chief Star Bulk Carriers ( SBLK ), Seanergy Maritime now has the bottom discounted NAV amongst its Greece-based friends:

Whereas the corporate ought to proceed to develop within the present market setting, I wrestle with administration’s strategy of promoting shares within the open market at a nonetheless important low cost to estimated web asset worth.

However with Seanergy Maritime’s valuation at a multi-year excessive, administration’s need to benefit from the corporate’s present inventory rally is considerably comprehensible.

Nevertheless, cheaper friends equivalent to Secure Bulkers ( SB ) and EuroDry ( EDRY ) have proven a lot better company governance in recent times, however each are primarily and even solely centered on midsize lessons, whereas Seanergy Maritime is extra -less clear Capesize recreation. .

At present ranges, I might not chase the corporate’s shares and would reasonably look forward to a pullback.

Due to this fact, I’m downgrading the inventory from “Purchase“to”Maintain on“.

Backside line

Seanergy Maritime Holdings reported 1Q24 outcomes that beat expectations, and based mostly on the corporate’s earlier 2Q TCE steerage, I anticipate 2Q outcomes to beat consensus estimates once more.

Additionally, with 1/3 of the obtainable days for the second half already locked in at a TCE of $30,000/share, 2024 ought to be a powerful yr for Seanergy Maritime.

The corporate additionally elevated its quarterly dividend, however disappointingly raised the mandatory funds from promoting new shares on the open market at nicely beneath web asset worth.

Whereas the inventory nonetheless trades at a major low cost to NAV, various Greek friends equivalent to Secure Bulkers and EuroDry now supply higher worth on the again of higher company governance.

Due to this fact, I’m downgrading my score from “Purchase“to”Maintain on“.

Editor’s observe: This text covers a number of small-cap shares. Pay attention to the dangers related to these shares.