Deutsche Bank Upgrades Star Bulk, Sees Dry Shippers Ready To Accelerate

“We are increasingly optimistic about the outlook for dry bulk rates and equities, even after the significant run in shares year-to-date,” Deutsche Bank’s Amit Mehrotra wrote in a report. He upgraded the rating on Star Bulk Carriers Corp. SBLK from Hold to Buy, saying that the company had the maximum leverage to changes in market fundamentals.

Evidence Of Positive Trends

Despite the weakness due to the Chinese New Year, dry bulk capesize rates have averaged $11,000 per day year-to-date, up more than three times from $3,300 over the same period a year ago, analyst Mehrotra noted. He added that supply growth accelerated during this period, with ~9 million tons of new capacity in January, representing the highest gross supply growth rate in four years.

“We also see the dry bulk market supported by fast-declining newbuilding deliveries,” Mehrotra mentioned. He estimated net dry bulk fleet growth of +1.7 percent in 2017.

Related Link: Dry Bulk Shippers: No Strangers To Volatility

Asset values also seem to be improving. Industry checks indicate “significantly more bids in the market for modern, second hand dry bulk tonnage, and we expect to see more evidence of this as the year progresses,” the analyst stated.

Upside To Star Bulk

There is significant upside to Star Bulk’s shares, since the company has the maximum leverage, both operationally and financially, to changes in dry bulk market fundamentals, Mehrotra commented.