Genco Shipping GNK has released their 3rd quarter results, full report linked above. The company’s results look significantly better than those for Dry Ships earlier this week. Genco reported a net income for the quarter of $1.10 per share. This is compared to $2.00 per share in the 3rd quarter of 2008, before everything fell apart for the shipping industry. The company earned $1.20 in the 2nd quarter of 2008.

Good news:

• GNK manages to bring an impressive 37% of their $93 million in revenues all the way to the bottom line.
• Depreciation and amortization work out to another 70¢ per share, giving Genco a nice cushion of free cash flow.
• There is only one more Capesize vessel on the order book to be delivered in the 4th quarter of 2009.
• There has been no share dilution over the last year.

Negatives:

• The company has a significant portion of their contracts expiring in 2010 at what are currently above market rates.
• Quarter to quarter net income is still decreasing.
• No dividends being paid.

GNK is attractive trading at about 5 times net income and 3 times free cash flow if those numbers can be stabilized at current levels. The shares have tripled off the 52 week low and are up 30%+ year-to-date. I think Genco is one of the better managed dry bulk companies, but I would be looking for either another share price pull back to the mid-teens or a stabilization of net income and a resumption of the dividend.

Today the Baltic Capesize index jumped almost 1200 points or 18% to 7724. This has pulled the broader Baltic Dry Index up 11.5% in one day to 4106. 4,000 on the BDI has been indexes’ average for the free-trade China era. This is good news for the dry bulk shipping companies.

The continued runup in dry bulk shipping rates causes me to question the wisdom of Genco Shipping signing their new Capesize vessel to a 2 year contract at $36,000 per day less commissions. (Press release linked above). My reading shows a BCI at this level means spot charters for Capesize vessels are well above $60k per day. The good news is that GNK has only 64% charter coverage for the remainder of 2009, so they should be able to pick up some nice revenues if the BCI stays at this level or continues to increase.

Things are looking good for the dry bulk shippers!

Linked above is the press release for the 1st quarter from Genco Shipping GNK. It is hard to imagine that just 6 months ago this company was still paying $1.00 per share in quarterly dividends. Looking at the 1st quarter number one can see that things are getting tighter for this one time high flyer. Here are some numbers that caught my eye. I threw out the one time gain for the sale of a vessel and have the Q1 2009 results followed by the Q1 2008 number:

• Net income:    $41.2 million vs. $47.8 million
• EBITDA:               $76.1 million vs. $74.9 million
• Average daily TCE: $33,203 vs. $35,891
• Vessel operating expenses:  $14.2 million vs. $10.9 million

With a larger fleet, only 60% of the rest of 2009 charter days locked in and well over $1 billion in debt, I do not think the trends are positive for Genco. I do think the company management has done a good job transisitioning from a growth model to a “let’s keep this thing going” model, but the dry bulk market need a significant swing to higher rates for GNK to really get things back to attractive numbers.

Genco stock has rallied very nicely since early March, but for the next several quarters I think there are more attractive companies in the dry bulk space.

OCNF, DRYS, DSX, GNK, EGLE, SBLK, EXM, GLNG, DAC.

Horizon Lines HRZ is the largest of the Jones Act shippers moving containerized cargo from the States to Alaska, Hawaii, Guam and Puerto Rico. Here is the list of why the company says they are well positioned going into 2009:

• Domestic trade is more stable than international trade
• Serve the basic needs of our trade lanes
• Strong, longstanding customer relationships
• Stable financial position – no recapitalization needed until 2012.

What I noticed is that HRZ generated $60 million in free cash flow in 2008 and has a market cap of $87 million. Amazing! The presentation had a net positive rate of growth of 2.2% for 2009.

Genco Shipping and Trading GNK You have to love a company that earns $35k per day at an operating expense of $5k per day, or not. Got to pay the interest on $1.4 billion revolving credit facility. Also, it would be a good idea to keep those ships working at the same high rates. Throw in the interest and general expenses and the per day expense per ship are about $13,200 per day. I still see Genco as a company that has 3 new Capesize coming later this year plus a 1/3 of their fleet coming off longer term leases. This is a company that really needs the global manufacturing economy to really pick up.

Ship Finance Ltd. SFL “Cash flow in exceeds cash flow out” pretty much sums up the philosophy of this company. It is unbelievable that this company has only a $350 million market cap. The company has $7 billion in net charter payments coming on there long term charters. There was an interesting chart during the presentation: Net cash flow after interest and debt amortization was 93¢ per share, easily covering the 30¢ dividend. SFL made large amounts of capital investments ($2.6 billion) in 2008 and in 2009 hopefully these investments will start producing increased cash flow and dividends.

Eagle Bulk Shipping EGLE is committed to their focus on the supramax market. The speaker was strongly positive about the positioning and prospects for his company. EGLE has a large newbuild program but has 80% of those ships with already committed charters. They have a very interesting chart on the cost of their new build contracts. They will be buying the ships at prices near the current value, not at the recent inflated values of ships of this class. Plenty of other interesting items in this presentation. Eagle Bulk has my attention.

There are my notes of 4 of the presentations. There are more to come, but I thought I should get this up for the weekend.

Note: I own a personal position in SFL.