The pending exit of Western Bulk’s chief executive and a disappointing 2023 financial performance have sent analysts at DNB Markets reaching for their red pens to revise forecasts for the company.
Shares in the dry cargo operator were trading down in Oslo this morning as investors digested the upcoming departure of Hans Aasnaes, a loss for last year and the lack of any quarterly dividends.
While DNB analysts have retained their “buy” rating on Western Bulk, their profit revisions are now some way below consensus in the wider market.
The bank cut its target price for Western Bulk’s shares and lowered the vessel earnings margin it uses to forecast company cash flows.
Western Bulk, which operates bulkers from handysize up to ultramax, reported a $15.6m loss for 2023 on Thursday. It also announced that Aasnaes would step down as soon as a successor is appointed.
The share price has fallen by nearly 4% since the Oslo Stock Exchange closed on Thursday, shortly after the company made the announcements.
DNB analysts have cut Ebitda expectations for Western Bulk for this year and next year by 28%. It estimates Ebitda of just over $14m this year and 2025.
Net profit should therefore fall around $13.2m annually for the next three years, DNB said.
“We are now 47% below Bloomberg consensus on Ebitda for 2024 [estimates] and 64% below for 2025 [estimates]. However, consensus for annual figures consists of only one contribution besides us,” the bank noted.
It does not matter that Western Bulk did not declare any quarterly dividends in 2023; DNB said it has an otherwise “solid” track record of distributing cash to shareholders.
The bank sees potential for an annual dividend of NOK 3.3 ($0.31) per share for the years 2024 to 2026.
Western Bulk’s net loss of $15.6m after tax last year reversed a $66m profit in 2022.
Net time charter revenue of $9.3m was down from $116m a year earlier, and it made an average net margin of $202 per ship day over the 12 months.
The annual result was dragged down by losses booked during the second half, despite an upturn in the supramax market.
Western Bulk recorded a $10.8m loss after tax for the final six months of 2023.
Net time charter revenue totalled $2.3m and its net time charter margin was $100 per ship day during the period.
Western Bulk could produce even better results if it is able to generate a bigger operating margin on its vessels in the years ahead.
DNB thinks there is potential for Ebitda to grow over by up to 70% the next two years if the operator can achieve a net time charter earnings margin of 9% to the current forward freight agreement curve.
This is the midpoint of Western Bulk’s historic operating margin, which ranges between 7% and 11%.
This could also generate an annual dividend of up to NOK 5.9 per share, according to the bank’s estimates.
It would also imply a share price of around NOK 50 and a 12% dividend yield, based on Western Bulk’s enterprise value being five times more than its Ebitda.
Western Bulk currently has an enterprise value of $47m, according to DNB.
