Seanergy Maritime Holdings Corp. (NASDAQ:SHIP) shares continue to rip higher, sending the stock upward for about 30% in gains just during the past month, with most of that coming in recent trading sessions. Volume has been building over the course of the move as well, with the stock seeing roughly a 100% increase in average transaction volume per session in recent action.
What’s driving the move? As we covered previously, the story here is quite interesting, and that was highlighted in a persuasive manner strangely enough by the company itself in the form of a recent presentation posted to their corporate site. The PowerPoint highlighted the tangible potency of the case to be made by the dry bulk shipping space at present. It’s important to see this for what it is: a commodity market, where the commodity is “volume of capacity for cargo shipping”. Each cubic foot of space represents a key resource for a growing global economy, and the growth curve for the supply of that resource has not been keeping up with demand growth, which is a disparity that could worsen to the benefit of SHIP shareholders.
Seanergy Maritime Holdings Corp. (NASDAQ: SHIP) is, for those not familiar with the company, an international shipping company specializing in the worldwide seaborne transportation of drybulk commodities.
The company has already been through a relatively recent restructuring and emergence, which we will detail in a moment. Suffice it to say, this was a streamlined situation before its recent deep value extension lower. In March 2014, the company completed its restructuring, following which it did not own any vessels. During 2015, the company acquired eight drybulk vessels, comprising six Capesize and two Supramax, and acquired an additional two Capesize vessels between November and December 2016. They also added an additional Capesize vessel on a second hand basis that should be soon in the company’s hands (expected to be delivered between May 25, 2017 and July 17, 2017).
“We believe we have established a reputation in the international drybulk shipping industry for operating and maintaining vessels with high standards of performance, reliability and safety. We have assembled a management team comprised of executives who have extensive experience operating large and diversified fleets, and who have strong ties to a number of international charterers.”
The company was incorporated under the laws of the Republic of the Marshall Islands, pursuant to the BCA, on January 4, 2008, originally under the name Seanergy Merger Corp. The name was changed to Seanergy Maritime Holdings Corp. on July 11, 2008
The prior restructuring even ran its course between 2012 and 2014, as follows: In August 2012, the company began discussions with former lenders to finalize the satisfaction and release of the company’s obligations under certain of its former loan facility agreements and the amendment of the terms of certain of the company’s loan facility agreements.
Between January 2012 and March 2014, the company sold all 20 of its former vessels, in some cases by transferring ownership of certain of the company’s vessel-owning subsidiaries to third parties nominated by its former lenders in connection with the company’s restructuring.
A Case to be Made
We think at this point that a relative value case can be made here against the likes of DryShips Inc. (NASDAQ:DRYS), Navios Maritime Holdings Inc. (NYSE:NM), Diana Shipping Inc. (NYSE:DSX), and Star Bulk Carriers Corp. (NASDAQ:SBLK). SHIP has a significant war chest ($14.4M) of cash on the books, which stands against about $10.5M in total current liabilities. While one should also note that debt has been growing over recent quarters, SHIP is pulling in trailing 12-month revenues of $34.7M. In addition, the company is seeing major top line growth, with y/y quarterly revenues growing at 59.4%.
As noted above, the case can be made that the turning point for the relative second derivative comps on the global economy versus the capacity for transporting dry bulk goods may have fallen into an imbalance when viewed through the lens of future expectations.
This is particularly true when one considers the possibility that we do see a major tax reform movement in the US in concert with more predictable measures, such as China’s new silk road infrastructure project and India’s massive push into infrastructure investment, as well as an infrastructure-based stimulus program in the US.
Any and all of these would quite likely benefit the dry bulk shippers more than anyone else given that we are talking about a huge jump in demand for commodities in many different parts of the world, and all of them would need to be pushed around on boat like the ones SHIP just acquired.
