SB - Safe Bulkers Inc

[InspireByReason]

Safe Bulkers Inc an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly coal, grain & iron ore, along shipping routes for some of the consumers of marine drybulk transportation service.

 

SB is controlled by transportation magnate Polys Hajioannou & family owning 54% of common.

 

This is a cyclical play. The company started losing money in 2015 because of an over-saturated market of drybulk vessels which caused lower lease rates. This resulted in lower orders for new vessels in 2016. Lower orders coupled with the continued decommissioning of older vessels will push lease rates back into profitable ranges for the industry & Safe Bulkers which will result in the market realizing SB's value.

 

It's debt appears to be manageable and is selling at a massive discount to book value. Thoughts?  :)

[petec]

Don't know much about bulkers but I know in containers you've had three key trends:

1. ships have been getting bigger (more efficient) at an incredible rate.

2. container cargo has stopped growing at 2-3x GDP and now grows at 1x.

3. with debt so cheap, companies keep ordering new ships.

 

Put these three together and you get very low pricing and ships become obsolete long before their useful lives have expired.  As a result, I don't trust book value.

 

This may not apply to bulkers.  Equally, it might.  You are looking at a company that's burning cash and has debt 5x the market cap so the possibility of a 100% loss is significant.

 

They seem to have prefs out.  Might be worth a look.  Seem to yield >12% and greater probability that book value covers them, so you have a potential uplift to par even in a bankruptcy?