Golden Ocean is set to become the dry cargo dividend vehicle John Fredriksen envisaged half a decade ago with its move to install scrubbers on 16 capesizes set to bring “super profit”, analysts say.
Golden Ocean paid a dividend of $0.10 per share in the second quarter, having reintroduced a payout in the opening three months of this year.
“Near five years after Fredriksen’s previous growth vehicle Frontline 2012 stated that it wanted to create a spot oriented capesize vehicle that could 'pay out dividends almost every day' we are finally getting here,” said Eirik Haavaldsen of Pareto Securities.
Haavaldsen says the payout will “increase steeply” from the third quarter of this year.
He forecasts a $0.25 per share payout for the period, with the company hitting a dividend yield of 11% in 2019.
Fredriksen’s plan has taken time to come together, with the new capesizes first ordered by Frontline 2012, backed by an equity issue, and later transferred to Knightsbridge.
“Five years, one merger and a restructuring later we are finally here,” Haavaldsen said.
“With no more newbuilds and only a few ballast water and scrubber systems left to fund, Golden Ocean is about to become that ‘almost daily-dividend-paying vehicle’ it was always intended to be.”
Birgitte Vartdal, chief executive of the bulker owner, says the decision on dividend payments will be taken quarter on quarter.
“Obviously, if we see our earnings improve strongly, we expect that we will do some adjustments to the dividend. But, we will also balance that towards investments and deleveraging,” she said.
Golden Ocean announced plans to fit scrubbers on an initial 16 capesizes as it booked a second quarter profit of $0.05 per share on Friday.
Vartdal said on the earnings call profitability from the scrubbers was likely to be "best in the beginning".
“You may end up in a situation where over time you have to have a scrubber installed to actually be competitive,” she said.
“But, that’s a bit early to speculate in that. But, I think it’s well worth to do the investment on part of the fleet.”
Jo Ringheim of Arctic Securities says Golden Ocean is positioning for super profits in 2020.
The analyst forecasts a bottom line profit of $144m for Golden Ocean this year, rising to $222m this year and $279m in 2020.
Ringheim calculates a modern capesize fitted with a scrubber will save in the region of $8,000 per day from January 2020.
“We expect the scrubber price to be around $2.5m per vessel and model a payback time of around 0.9 years,” the analyst said.
“We share’s Golden Ocean’s view that the new sulphur regulations will increase the competitive advantage for fuel-efficient vessels considerably, and with an average age of five years Golden Ocean is well positioned to benefit.”
Nicolay Dyvik of DNB Markets says the move to fit scrubbers is a prudent approach to the forthcoming regulations.
“Despite capex, dividends should be here to stay, and the dry bulk market is on the cusp of a strong second half driven by increasing iron ore imports to China,” he said.
