Cleaves Securities is backing the dry bulk sector to rebound strongly over the next few years.
The Norwegian investment bank believes bulkers will enjoy healthy demand from shippers, while the orderbook remains low to 2025.
Head of research Peter Michael Christensen said: “We see demand growth outpacing supply growth in the dry bulk space from the second half of 2023.”
He is even forecasting a new cyclical peak for the second six months of 2025.
Christensen is tipping capesize asset values to potentially climb 28% over the next two years.
“With Chinese New Year, which typically marks the seasonal low, firmly in our rear-view mirror, we have already seen positive signs in the market over the past couple of weeks as both [forward freight agreements], spot and time charter rates have seen gains,” he said.
“We also believe asset values found a floor a few weeks back, as expected.”
Cleaves brokers have noted signs of the dry bulk sale-and-purchase market turning positive again, with numerous purchase enquiries.
Buyers who were watching and waiting are now putting money on the table, they argue.
Sellers, on the other hand, are pulling ships off sales blocks or raising price ideas.
Himalaya timing it right
One company timing its entry into the bulker market correctly is Tor Olav Troim-backed Himalaya Shipping, Cleaves believes.
The Oslo-listed company said this week that it has taken delivery of the 210,000-dwt Mount Norefjell, the first of 12 dual-fuel newcastlemaxes due in the next couple of years.
The vessel is starting a two-year charter at $30,000 per day with Mitsui OSK Lines of Japan.
This is one-and-a-half times the cash breakeven level.
With the Mount Ita and Mount Etna to follow shortly, the company will start generating cash sooner than expected, according to Christensen: “The timing is very good in our view, with the rest of the fleet being delivered into an expected cyclical upswing.”
Cleaves is estimating a 112% boost to net asset value by 2024 and a dividend yield of 24% for that year.
Assuming the company follows the lead of Troim-backed 2020 Bulkers and pays out substantial parts of net profits as dividend, this yield is the “icing on the cake”, the analyst believes.
Christensen also argues the owner is well positioned for any future environmental regulations.
He has a “buy” rating on the stock.