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EnvestorFirst (< 20)

This Ship Is Sailing Are You On It?



August 03, 2010 – Comments (2) | RELATED TICKERS: GNK , SHIP , DRYS

Long been fans of trading in dry ship companies such as SHIP and DRYS we want to bring to our subscribers attention GNK.

A scan for due diligence revealed the following information:

"I’ve seen that the market is quite short-sighted and will often bid a stock to lofty levels based on one or two good years. Based on the current situation, I believe that a company earning over $4 TTM and still making major moves to grow should not be valued under $20. Its stock is mispriced in the short-term, likely caused by the 35 day slump in the BDI.

Longer term, an eventual recovery should see GNK exceeding the $4.73 EPS from 2009, especially with 30% more tonnage capacity in the future. If GNK can pull off $5 in full year earnings in 2012 or 2013 and the market assigns a multiple of only 7, that’s more than a double from current levels. Assigning a multiple of 7 to TTM earnings of $4.48 gives us a value of $31.36 per share.

Three to five years from now, I expect a better economy than we have right now. I expect EPS to exceed $5 at that time. If people are more bullish then, a P/E multiple of 10 would see a price of $50 for GNK. That’s not unfathomable considering the high of $84.51 in May 2008 (more than 29 times 2008 earnings). I know that was during the commodity boom, but I’m only asking for a multiple of 10 instead of 29, which I believe is quite reasonable. A multiple of 12-15 is still not unthinkable and would put it in line for considerably more than a triple from the current level.

I believe GNK is both a solid short-term and long-term play. Both profitable and unprofitable drybulk shippers have been slammed with the recent slump in the BDI. I expect a short-term bounce of 20% to 50% and a possible triple or more within 5 years. Management has done a good job with fleet utilization, achieving almost 100% as of Q1 2010. The growth is quite aggressive, but I believe the acquisitions will contribute nicely to future earnings as long as the debt level is contained."

Suffice to say we believe this might not only be a long time play but also a solid short term one.  Keep tabs on our investment highlights on Twitter and look for new stock commentary on our internet channel. For more information about GNK click this link.

2 Comments – Post Your Own

#1) On August 03, 2010 at 2:05 AM, Donnernv (< 20) wrote:

Click on me!  Click on me!  I am promoting my newsletter, but I'm too cheap to pay MF for an Click on me!


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#2) On August 04, 2010 at 9:42 AM, EnvestorFirst (< 20) wrote:

Donnernv, thanks for the comment.  Made me laugh (even without coffee this morning).  

 As you can see I am new here, may I ask you what your suggestion is for building credibility rather then getting passed off as a newsletter promoter.  

I always link my sources and only mentioned Twitter and YouTube as ways to connect with me.  I could leave off the links to the social media I suppose but considered it to help connect wtih other minds.  

Any thoughts would be very much appreciated.   

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