Genco Shipping(GNK)

Genco Shipping & Trading Limited

Stock: GNK

Rating: Good

Author: Waleed M. Tariq

Summary

  • The company offers an 11% dividend yield, exceeding sales growth, and robust balance sheet.
  • The stock is solid buy since it can efficiently generate cash flow for expansion and payouts.

Bullish

  • grade the stock as good investment owing to its capacity to efficiently generate cash flow for expansion dividends.
  • The company offers healthy yearly dividend of 10.88% and dividend yield of 22.88%, and so allowing it to reinvest in future growth while rewarding shareholders.
  • Rising revenues will be helped by reduced voluntary debt payments of $8.75 million, nearly 85% drop from Q4 2021, to produce cash flow for dividends.

Bearish

  • Shipping costs soared due to pandemic-related constraints.  Due to reduced cargo and crowded docks, supply-and-demand tightened, raising freight rates.

Maritime Market Update

  • 2021 shipping costs soared because of pandemic restrictions. Due to reduced cargo and crowded docks, the supply-and-demand gap hiked freight rates.
  • Since January 2022, east and west coast freight spot rates have plummeted 50%.
Containership spot rates from 2019 to march 2022

Financial Performance

  • The firm’s revenue YoY revenue growth of 154 percent in 2021 surpassed the 139 percent YoY average annual fleet rate increase, indicating that the firm’s sales growth was not entirely attributable to growing market rates, implying that even though the firm will feel the pressure of decreasing spot rates, its development will not be completely halted by them.
  • In reality, the average yearly revenue projection for 2022 is a 2.9 percent reduction from 2021, while the consensus EPS drop is even smaller at 1.6 percent, from $4.26 to $4.19.

Chart

Dividends

  • Rising revenues will be helped by reduced voluntary debt payments of $8.75 million, a nearly 85% drop from Q4 2021, to produce cash flow for dividends.
  • The company’s revenue would drop by about 32% (day average chartered rate) in Q1 2022 compared to Q4 2018. This will earn $69.05 million in dividends, or $1.63 per share, indicating a sustainable dividend distribution with room for dividend growth.

Leverage

  • The corporation has reduced its debt by $203 million in 2021, putting it to around $239 million. Total debt to equity is roughly 26%, net loan-to-value is 15%, and interest cover is almost 13x.

Valuation

  • 5.8 is 70% below industry median forward PE. 1.13 PB and PCF for comparison group. 2.64x P/S may frighten value investors. Intrinsic value is $54, 46% more than high analyst forecast of $37. This may appear ridiculous, but it reflects the stock’s earnings potential, book value, and cash flow.

Conclusion

  • It increased market share this year. Strong fundamentals and investor sentiment should keep it going. A growth and income stock? Finances and shareholder returns improve with deleveraging, dividends, and sales growth.