Pacific Basin Shipping plans to spend up to $40m in buying back its shares, which it believes are undervalued.
The Hong Kong-listed owner-operator, which has a fleet of bulkers up to panamax in size, said it will cancel any shares it repurchases.
The $40m budget for the programme, which will run until the end of this year, would be enough to buy back just under 2.5% of the company’s issued shares, based on Thursday’s closing price of HK$2.42.
The mandate will allow the repurchase of up to 10% of its share capital.
Pacific Basin said it plans to use its available cash to finance the buybacks.
The company has aimed for some time to return more cash to shareholders, but CEO Martin Fruergaard said in October that it had not decided whether to do so with share repurchases or in dividends.
Pacific Basin said the buyback programme reflects “confidence in its long-term business prospects and potential growth”.
“In addition, the company believes that actively optimising the capital structure through implementing the share buyback programme is expected to enhance its earnings per share, net asset value per share and shareholder’s return,” the board said on Thursday.
Pacific Basin’s trading update has revealed weaker freight earnings.
Its handysize fleet earned average time charter equivalent earnings of $11,050 per day during the first quarter, 18% below the same period last year.
Average daily TCE earnings for its supramaxes were $13,610, roughly the same as a year earlier.
Operating activities generated an average daily margin of $510 during the first quarter, down from $1,090 in the same period in 2023, even though daily operating days were 32% higher this year.
“Operating activity margin was adversely impacted by cargo commitments necessitating the chartering-in of vessels within a higher rate environment,” Pacific Basin said in its presentation to investors.
For the current quarter, the company has a high level of coverage, with 84% of its handysize days covered at $12,290 per day and 96% of its supramax days covered at $14,610 per day.
But Pacific Basin has more open days towards the end of this year, in expectation of an upturn in the spot market.
It has forward bookings for 36% of handysize days at an average rate of $9,280 per day for the rest of this year.
The current forward curve for freight forward agreements indicates daily handysize rates of $12,050 next quarter and $11,760 in the final three months.
Some 47% of supramax days have been covered at $11,840 per day.
Pacific Basin has an operated fleet of 302 vessels, of which it owns 132 handysize and supramax bulkers.
