Seanergy Maritime Holdings Corp. [NASDAQ: SHIP] is the only pure-play Capesize ship-owner publicly listed in the US.
Seanergy provides marine dry bulk transportation services through a modern fleet of 11 Capesize vessels with an average age of 11.5 years and aggregate cargo carrying capacity of approximately 1,926,117 dwt. The company’s executive offices are in Athens, Greece.
Is Seanergy Maritime Stock A Buy?
Taking the term ‘penny stock’ to a whole new level, we have Seanergy Maritime [NASDAQ: SHIP] whose stock was trading at $0.2450 on March 11th, 2020 when COVID-19 (Coronavirus) was declared a pandemic by the WHO.
It has had a better run since then, jumping by over 450% to currently trade around $1.31. As one of the most successful investors in the world, Warren Buffet famously said, “The time to pick up undervalued companies is while there’s blood in the street,” but is an investment in Seanergy Maritime worth the risk?
To boost its balance sheet in Q1, Seanergy raised roughly $25 million through four public offerings. The shipping company also raised another $9.9 million from warrant exercises.
Raising capital while the pandemic is raging demonstrates the company’s ability to raise money even during trying times.
Analysts believe the company will use the money to reduce debt and forecasts a debt of $196.8 million by the end of the year – down from the prior estimate of $206.3 million. It will also enhance its ability to extend debt maturities.
The company, during the period, also successfully closed the previously announced refinancing of a credit facility secured by two of its Capesize vessels.
This refinancing, and the settlement achieved with the outgoing lender, will result in a $6.6 million aggregate reduction in the company’s debt. Despite the impact of coronavirus-induced deceleration in global trade and industrial production, the company remains optimistic about its future prospects.
Synergy expects to put in a better performance in coming quarters, hoping that that the stable demand from China, the COVID-19 economic stimulus relief and the ramp up of the Brazilian exports, in-line with Vale’s recently reiterated production guidance, will contribute towards what it believes will be a sustainably healthy market for the rest of 2020 and in 2021.
Seanergy Revenues Are Down, But Cash Is Up
Seanergy Maritime’s [SHIP] fleet performance in Q2 was greatly hampered by the outbreak of the COVID-19 pandemic in Asia and the subsequent slowdown of Chinese industrial production, which had a detrimental effect on the demand for iron ore imports.
For 2Q20, the company generated net revenues after voyage expenses of $4.7 million, a 41% decrease compared to the second quarter of 2019.
EBITDA for the first six months of 2020 was negative $1.1 million, compared to EBITDA of $2.1 million in the same period of 2019, a decline driven by the reduction in net revenues after voyage expenses.
On the brighter side, cash and cash equivalents as of June 30, 2020, including restricted cash, stood at $30.4 million, marking a 109% improvement against December 31, 2019.
Is Seanergy Reverse Stock Split A Concern?
However, what proved to be more detrimental for the company’s stocks was its decision to go ahead with a 1-for-16 reverse stock split, in order to comply with the Nasdaq minimum bid price requirement.
The company had until September 25 to get the share price up to the required $1 minimum listing price, but, eventually, took the decision to resolve the issue before that.
This made investors nervous who feared the shares would slide further once they start trading on a split-adjusted basis.
Worrisome: Baltic Capesize Index Has Been Volatile
Another thing to note is that the Baltic Capesize Index has been particularly volatile in 2020, jumping by more than 370% in April after factory and port activity in China gathered pace as lockdown measures were eased in China.
It then slid close to 70% the next month owing to slack international demand for iron ore. The Baltic Capesize Index provides a benchmark for the price of moving the major raw materials by sea and tracks rates for ships ferrying dry bulk commodities and reflects rates for Capesize, Panamax and Supramax vessels.
Additionally, Brazil, one of the primary producers of iron ore, is also currently one of the world’s current COVID-19 hotspots. With new infections rising at breakneck speed, iron ore shipment is likely to experience further delay.
Having said that, the company expects things to pick up later in the year, thanks to rising steel demand in China, historically low iron ore inventory levels and signs of a recovery in Brazilian iron ore exports. are bullish signals for a much stronger Capesize market in 2H20.
Are Seanergy Maritime Competitors A Threat?
Companies in the business of providing marine dry bulk shipping services are considered alternatives to and competitors of Seanergy Maritime, including Braemar Shipping Services, CMA CGM, SEACOR Marine [SMHI], Navios Maritime Partners [NMM] and Grindrod Shipping [GRIN], among others.
A majority of these companies are small-cap transportation companies, and investors should make an investment choice based on the strength of their institutional ownership, profitability, future outlook, dividends, risk and analyst recommendations.
Despite massive share price depreciation in recent times, analysts still remain firmly in the shipping company’s corner. The optimism stems from forecast for an eventual rebound in international shipping activity and higher rates along with the company’s decision to use recent equity proceeds to reduce and/or extend debt maturities.
The company also hopes to benefit from a significant reversal of the negative factors and recovery gathering pace with improvement in the weather conditions in Brazil and robust demand for cargo from China.
Is Seanergy Stock A Buy: The Bottom Line
The company already reeling from massive depreciation, had to contend with the negative effects of the pandemic. This made the first half of 2020 one of the most challenging periods in the history of dry bulk shipping.
The company’s results for the second quarter and first six months of 2020 were materially affected by the depressed earnings’ environment due to a combination of events that negatively impacted the Capesize market.
The company generated net revenues after voyage expenses of $4.7 million in the second quarter of 2020, a 41% decrease as compared to 8.0 million in Q2 2019. The net loss came in at $11.3 million as compared to $6.9 million in Q2 2019. In the beginning of the year, the outbreak of the COVID-19 pandemic in Asia and the subsequent slowdown of Chinese industrial production had a detrimental effect on the demand for iron ore imports.
Going into the second quarter, when the Chinese economy started to recover, the severe weather effects in Brazil handicapped Vale’s iron ore production capacity. As a result, exports reduced by 10% year-over-year and, consequently, the daily TCE of the Baltic Capesize Index (‘BCI’), on May 14, 2020 reached $1,992, the lowest point after the all-time lows in 2016.
However, things have been slowly but surely improving for the maritime company. In July 2020, the company regained NASDAQ minimum bid price requirement compliance.
In June 2020, Seanergy entered into a settlement agreement with one of its lenders, resulting in a gain of $5.6 million. In May 2020, the company agreed to acquire a Japanese 2005-built Capesize vessel from an unaffiliated third party, for a gross purchase price of $11.4 million.
Additionally, the company hopes to continue to pursue opportunities that are likely to serve strategic targets of sustainable growth and capital structure improvement in the near future. Analysts believe the rising shipping rates bode well for the rest of the year and maintain a buy rating on the stock.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.