Buy The Dip In Safe Bulkers, Seaport Global Says In Upgrade

Safe Bulkers, Inc. SB shares have leaked 15 percent since early June, and investors should buy the dip, according to Seaport Global.  

The Analyst

Seaport Global's Magnus Fyhr upgraded Safe Bulkers from Neutral to Buy with a price target lifted from $3.50 to $5.

The Thesis

The stock's recent weakness is attractive buying opportunity, as it coincides with a 30-percent gain in the Baltic Dry Index, Fyhr said in the Tuesday upgrade note. (See the analyst's track record here.) 

Recent momentum in the shipping industry is likely to strengthen in the back half of 2018 from increasing Brazilian iron ore exports and higher coal imports to China and India, the analyst said. 

Data from Arrow Shipbrokers suggest Capesize resale value has risen more than 10 percent in 2018, and drybulk asset values are likely to continue strengthening, Fyhr said. South Korean liner company Sinokor reportedly paid $115 million for four 2011/2012 Chinese-made Capesize vessels, 4 percent above the ships' valuation.

This bodes well for Safe Bulkers' stock, as its current net asset value is lifted from $2.10 per share to $2.80, and any 10-percent increase in fleet value adds 86 cents per share to its estimated net asset value, according to Seaport. 

Safe Bulkers is trading near its historical average of a 15-percent premium to its current net asset value, Fyhr said. The analyst's revised $5 price target is based on a similar 15-percent premium to a 2019 estimated year-end net asset value of $4.43 per share.

Price Action

Safe Bulkers shares were up 2.47 percent at $3.32 at the close Tuesday.

Related Links:

Safe Bulkers The Best Play For A Dry Bulk Recovery, Says Morgan Stanley

Benzinga's Top Upgrades, Downgrades For July 31, 2018