Star Bulk’s latest fleet deal looks set to provide a twin boost to its profitability with some analysts suggesting this week's move is the best of the company's three major transactions this year.
Petros Pappas-led Star has inked a cash plus shares deal for up to seven bulkers from ER Capital Holding.
The transaction will see it buy two 2010-built capesizes and a supramax. It has also secured options of four further capesize vessels.
Randy Giveans, Jefferies’ lead shipping analyst, expects Star to take the options. However, it is not just Star’s fleet growth in a rising market that has caught the analyst’s eye.
He says the six 2010-built capesizes are the ideal vessel size and age to install scrubbers, paving the way for Star Bulk to increase its scrubber fitted ships from 22 to 28 before new emissions laws arrive in 2020.
Star, which has merged with Songa Bulk and bought ships from Augustea and York Capital this year, will have a fleet of 115 dry cargo vessels should the options be added.
The company has now been profitable for three quarters in a rising market and Giveans has raised his projections following the latest acquisition.
He now expects the company to log a profit of $122.97m this year and $168.29m in 2019.
Clarksons Platou Securities analysts say the ER transaction is a “highly attractive and impressive deal”.
“The transaction is another example of excellent use of shares to acquire ships,” wrote Herman Hildan and Frode Morkedal.
“The prior deals earlier this year, including the Songa Bulk acquisition, were done with printing shares at NAV or above NAV.
"This latest transaction is perhaps the best deal yet, with fewer shares than we would have expected given our valuation of the fleet.”
Analysts at Drewry Maritime Financial Research note star bulk will add more than 30 vessels to its fleet in the third quarter.
This should further enhance aggregate earnings as freight rates continue to revive on the back of strong demand of dry bulk commodities such as iron ore, coal, bauxite and coarse grains, they explain.
