Star Bulk Carriers (NASDAQ:SBLK)

CAPS Rating: 2 out of 5

A blank check company which was formed to serve as a vehicle for the acquisition through a merger, capital stock exchange, asset acquisition, or other similar business combination with one or more businesses in the shipping industry.


Player Avatar djbusby (41.08) Submitted: 1/5/2010 10:55:24 PM : Outperform Start Price: $34.33 SBLK Score: -165.52

Star Bulk Carriers is an undervalued shipping company with lots of upside. In management's latest conference call, they claimed that the charter-free value of the fleet is $335 million, and the total adjusted value of the fleet $400 million. This is far less than the approximately $682 million reported on the third quarter '09 balance sheet, but still corresponds to a liquidation value of $2.62 per share, and a fair value of $3.68 excluding future earnings growth.

The future earnings growth element is what excites me about Star Bulk. To be honest, many of the current contracts are set at less than stellar amounts; it certainly didn't help that some of the most lucrative contracts were recently broken and reset at lower rates. However, if the BDI continues to improve, which I believe it will (all of the industry newbuildings considered), Star Bulk will be able to improve its earnings much faster and greater than the majority of its peers. Given that its shares are priced just a little bit above liquidation value, this is quite a bit of upside indeed.

Even if the BDI continues to languish, I don't think Star Bulk will have any liquidity problems. $60 million of debt is due in 2010, but this drops off to only $32 million due in 2011. Whereas earnings have recently been low not least because of impairment charges, this hasn't affected cash flow as much. With almost $30 million of cash on the books, Star Bulk should easily be able to meet their debt obligations even if current conditions subsist. Bottom line: Star Bulk has very little downside, lots of upside, and a significant (even if mostly symbolic) dividend. I like what I see.

Report this Post 4 Replies
Member Avatar bigengine1518 (49.32) Submitted: 3/12/2010 12:03:18 AM
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Member Avatar QwertyHero (< 20) Submitted: 12/7/2010 10:50:20 AM
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I HOPE SO!!! I HAVE 400 SHARES!!!!!!!!!!!!!

Member Avatar albaitis (98.21) Submitted: 8/29/2011 11:46:15 AM
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My issue with SBLK is recent. I previously owned shares. However, when a company that is undervalued issues shares, they are watering down the interest of all shareholders. The management could have issued the same number of shares when the stock was 2-3 times higher and received 2-3 times as much money. Instead, they made every owner own less of the company. The reason they did this was to pay a .05 cent dividend. Warren Buffet says "... companies sell newly issued shares to Peter in order to pay dividends to Paul. Beware of “dividends” that can be paid out only if someone promises to replace the capital distributed.)" This sounds like a classic example of a non-shareholder oriented management that is focused on accounting appearance over economic substance. My advise is stay away. I'm not generally one to buy high and sell low, but when management blatantly abuses shareholders, I'd say it's time to get out. I bought shares above $3, and sold at $1.50.

Member Avatar albaitis (98.21) Submitted: 8/29/2011 11:48:56 AM
Recs: 0

I'm not saying the stock is not cheap, because as far as the numbers go it is very cheap (but so is almost every company in the drybulk sector). I won't trust or invest in management that doesn't care about me as a shareholder. Also, note that the CEO continues to buy ships that were previously owned by people in his family. I doubt the reason was because they were giving him a great price on the ships.

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