Rating: Strong Buy
Author: Waleed M. Tariq
- Bermuda-based Norwegian shipping business Golden Ocean Group. The company runs dry bulk ships that transport ore, coal, and grain.
- The company’s 100 vessels can carry approximately 12,000,000 DWT.
- Their broad fleet enables flexibility. On December 12, the company was worth $1.7 billion.
- GOGL will benefit on the burgeoning marine shipping business.
- As the global economy recovers, demand is expected to rise.
- Following a positive business environment, the company’s earnings growth is predicted to accelerate.
- The corporation may become bearish if the rate of ship growth slows in the coming years.
Marine Shipping Market
- There are various explanations for the current rise in dry bulk freight.
- Few ships-August 2021 predictions say new boats will add 53.9m DWT to global bulk transport. This is substantially lower than 2020’s 71.6m DWT and 2019’s 97.8m DWT.
- Supply Chain-Supply chain concerns have also increased demand for dry bulk freight. Recent problems have caused port congestion and longer ship ties.
- Covid-19-Covid-19 destroyed industry. GOGL earned $607m in 2020. Covid’s slowing demand lowered this. This slowed GOGL and shipping income. Company grew with demand.
- If it doesn’t help GOGL, the above info is meaningless. Let’s examine some investment measures.
- Regarding Charter Rates-Capsize ships break even at $12,800 per day, Panamax at $8,400. According to the last quarterly data, each Capsize ship earns over $20,000 per day and each Panamax ship earns over $15,000.
- Golden Ocean Group’s TCE rate averaged $24,920 per day in Q2 2021. It was $15,886 per day last year.
- Slow shipbuilding-GOGL’s large fleet can benefit from slower new vessel arrivals. GOGL has the world’s largest Capesize fleet. The ships have a 6.5-year lifespan, and the company won’t buy any.
- The pandemic will boost demand for commodities. Supply chain problems are increasing dry bulk freight demand. These factors make GOGL a great investment in a booming market.