Dry Bulk Pair Trade: Buy Star Bulk Carriers, Sell Scorpio Bulkers

Summary

• Star Bulk Carriers and Scorpio Bulkers are nearly identical companies - both operating in the distressed dry bulk shipping markets.
• Both companies have relatively weak balance sheets (D/A in the high 60%), both companies are poised to burn cash in 2015, but both also offer strong upside in a recovery.
• However, SBLK has higher upside (90% vs. 62% in a medium recovery) and is more likely to survive. SALT shareholders could lose all upside to dilution and forced asset sales.
• SALT management has made some massive blunders and the related-party management structure brings up potential conflicts of interest. SBLK has a stronger relative operational history.
• SBLK's fleet of 96 vessels is fully-funded whereas SALT faces serious concerns about its ability to complete its newbuilding program.

Intro & Quick Pitch

Seeking Alpha recently announced a significant pair trade contest, with entries due by June 21st, and I am excited to enter my favorite trade idea: long Star Bulk Carriers (NASDAQ:SBLK) and short Scorpio Bulkers (SALT).

In a nutshell, these companies serve a virtually identical market mix with similar large pro forma (fully delivered) fleets. SALT has a slightly more modern and efficient fleet, but any vessel efficiencies will be offset by SBLK's larger scale. The key differential between these two companies is their operational position. SBLK's expansion is fully funded, and they have sufficient equity and operational capacity to continue weathering a downturn longer than SALT. Meanwhile, SALT still faces questionable newbuild delivery prospects and is facing sizable operational losses for 2015 and 2016, further hampered by a poor managerial decision to time-charter in a substantial number of vessels. If the current market continues, SALT will be forced to throw away a large portion of their remaining upside potential via massive vessel sales and will continue their horrific dilution trend. Meanwhile, SBLK will also suffer, but their better operational scale will prevent a similarly-sized meltdown. SBLK's large on-the-water fleet will continue to provide potential upside in case of a sooner-than-expected recovery. SBLK's future cash flow potential is much stronger than SALT's potential when the recovery finally occurs.

Based on a superior fleet delivery potential, operational scale and history, upside potential, and institutional support, I recommend Star Bulk as a strong candidate for a pair trade against Scorpio Bulkers. While I am personally only participating in this trade via a long position in SBLK, I believe a SALT short provides an excellent candidate for a pair trade for those who are adequately capitalized and can accept the corresponding risks.

Other Pair-Trade Candidates

It's difficult to assemble a quality pair-trade, even in the commodity-style shipping sector, since most operating companies have significant key differences. I toyed with a few other pair trades that I find compelling, such as in coal: long Arch Coal (ACI), short Alpha Natural (ANR), machinery: long Caterpillar (CAT), short Deere & Company (DE), banking: long Bank of America (BAC), short Wells Fargo (WFC), or oil: long Sanchez Energy (SN), short Chevron (CVX). All of these candidates presented compelling valuation arguments, but their reliance on slightly different sectors (e.g. Deere with agriculture vs. Caterpillar with mining or Arch with thermal coal vs. Alpha with metallurgical coal exposure) eliminated them from suitable contest entries. The dry bulk pair trade was chosen due to nearly exact market exposure and company structure, but with different balance sheets, institutional support, and operating capabilities providing a clear risk/reward valuation gap.

Previous Shipping Pair Trades: Long Wait?

Recommending 'pair trades' is not something I do very often. I typically don't have the stomach to directly short a stock, and buying options on two different firms can prove to be very expensive, especially with a long-term thesis. The last two shipping pair trades I recommended or inferred were long Nordic American Tankers (NAT), short Frontline (FRO) back in 17 October 2011 and short Box Ships (TEU), long Diana Containerships (DCIX) back in 16 August 2012.

To-date: FRO (short) has dropped 47% and NAT (Long) has gained 27% (adjusted for dividends). 1-year return was a 35% loss for FRO and a 34% loss for NAT.

To date: TEU (short) has dropped 84% and DCIX (Long) has dropped 46% (adjusted for dividends). 1-year return was a 40% loss for TEU and a 20% loss for DCIX. Note: I turned publicly bearish on DCIX at $7 in February 2013. If you assume that closed the long-side of the trade, the gains were enormous.

Pair trades, especially those based on fundamentals, can take a long time to develop. I include these two examples to both show my successful track record, but also to caution on time frames. This current dry bulk pairing (long SBLK, short SALT) is based on mismatched balance sheets and cash flow potential and could also take a longer time to develop fully.

Star Bulk Carriers (Long Candidate) Overview

Star Bulk Carriers Corp began trading in the US markets in December 2007 during the peak of the dry bulk market cycle. Star Bulk is a dry bulk shipping company which functions as a holding company by purchasing assets (vessels) and leasing them back to operators via time-charter contracts. Dry bulk is a major component of international trade and cargoes include coal, iron ore, grain, and forestry products.

With a fully-delivered fleet of 96 vessels totaling over 11M deadweight tonnage (DWT), SBLK boasts one of the largest publicly-traded bulk fleets in the world. Star Bulk Carriers currently trades at approximately $2.93 and has approx. 218 million shares outstanding, for a market capitalization of approximately $640M.

Brief Long Pitch

Star Bulk is an attractive long (speculative bet) on a drybulk recovery due to its strong pro forma balance sheet, impressive institutional involvement, and impressive operational efficiency. Fully delivered, SBLK will have scale with the world's largest publicly-traded dry bulk fleet. SBLK's pro forma NAV is approximately $2.94, close to the current stock price of $3.01. In a full dry bulk recovery (unlikely until 2017-2018), SBLK is capable of upside exceeding 6x returns from its current price. Despite horrendous market headwinds, I believe SBLK will be able to weather the storm, and even if future dilution occurs, SBLK offers attractive risk/reward to potential investors.

Scorpio Bulkers (Short Candidate) Overview

Scorpio Bulkers is a holding company focused on the dry bulk shipping sector. They initially were scheduled to own the world's 2nd largest publicly-traded dry bulk fleet, but after recent sales transactions and financial floundering, they are currently scheduled to be number four, following Star Bulk Carriers, Golden Ocean (GOGL), and the Baltic/Genco (BALT) combination. It's uncertain how their ultimate fleet size will pan out.

SALT currently has 9 vessels on the water, 13 vessels chartered-in, and 51 vessels in their new building program (deliveries scheduled between Q2-15 and Q3-16). Scorpio's fleet is unrivaled in its modernity, with all vessels built in 2014 or newer. Scorpio Bulkers currently trades at approximately $1.64 and has 314 million shares outstanding, for a market capitalization of approximately $518M.

Brief Short Pitch

Scorpio Bulkers is heavily levered and has gigantic financial commitments within the next 12-18 months while suffering through a tough market that shows no signs of recovery until 2017 at the earliest. SALT is losing institutional support as evidenced by the recent equity offering, and is only a few missteps away from subsequent dilutions. Despite huge upside potential if they survive to a recovery scenario, it is unlikely the majority of their fleet will reach the water without continued dilution or asset sales. Although SALT's NAV appears decent at $1.72, roughly in-line with $1.71 share price, this does not account for the massive current cash burn.

Exhibit 1: Balance Sheet Comparison and Discussion

Scorpio's Precarious Situation

SALT contracted for 80 total vessels at the peak of its expansion plans in mid-2014, but the further collapse of values in 2015 caused their financing plans to go awry. Following multiple dilution episodes, including the recent $1.50/sh offering, SALT has shrunk its fleet to 60 total vessels while also raising additional cash. Adjusting for the approximately $195M of new cash, SALT has roughly $250M in net cash versus remaining new building obligations of $1.32B. With the fully delivered fleet worth approximately $1.61B, SALT will have a net debt-to-assets (D/A) ratio of approximately 66%. This debt ratio is still relatively high and if cash burn continues, SALT will likely need to pursue additional asset sales or suffer additional dilution.

SALT has assets worth $1.61B minus net debt requirements of $1.07B, and this is optimistically assuming SALT can successfully clear all assets "held for sale." This results in pro-forma NAV of $540M, or $1.72/sh. (approx. 314M total shares). Most loan covenants cap between 60-80% of debt-to-assets (D/A) or loan-to-value (LTV is a similar metric more commonly used with secured debt, essentially the same as D/A, but typically vessel set specific). Even a small drop in operating cash flow or a continued decline in vessel valuation could lead to an additional round of equity dilution. Just a repeat in the realm of last year's $50M loss alone (I'm expecting $50-$60M loss as a minimum for 2015) could push SALT into non-compliance of a moderate 70% LTV requirement. The last share sale occurred at $1.50/sh (well below NAV), and with NAV now at $1.72/sh (post-dilution), future offerings could be even worse. A $50M-$60M loss of cash (likely to be even worse for 2015), would apply tremendous pressure to the balance sheet without additional asset disposals. Assuming fire-sale stock pricing below NAV, another $100M equity raise could dilute shareholders by 20-25%. Without strong institutional support, any further equity sales will continue to be far below the current market price and NAV.

Another potential concern is the financing for the 17 vessels SALT has listed as "held for sale." SALT has outstanding payments of $571M. Although five of these vessels have been sold (12 remain), I estimate the remaining liabilities to be upwards of $300M. I am not confident that SALT can sell these vessels without incurring significant losses.

Star Bulk's Stronger Positioning

SBLK still hasn't announced its Q1-15 results (expected June 30th), but based on a June 2015 presentation ($628M net debt) and adding back the net proceeds from recent vessel sales (approx. $70M), improves the net debt to $560M. Adjusting for 218M shares outstanding and assuming current fleet valuation of $1,116M, results in a current net asset valuation (NAV) of $2.55 per share.

The total delivered fleet valuation is approximately $2.1B. With net debt of close to $560M and remaining installation payments of approx. $900M (as of May 31, 2015), SBLK's pro forma LTV will be close to 69%, in a similar position as SALT's leverage. Fully delivered NAV per share is approximately $2.94 per share. The below slide from a June 2015 presentation highlights management's plans (note the sales proceeds are for vessels that have already been sold, and does not impact the current fleet).

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SBLK was hit by the same asset crash as SALT, but they conducted their emergency equity raises in a more responsible manner, with full institutional support. SBLK faces the same balance sheet risk as SALT in a future scenario, but they also have potential to sell off more on-the-water vessels.

Exhibit 2: Fleet Comparison and Discussion

Scorpio's Fleet - Mostly Newbuildings

SALT has a fleet of 9 vessels, with 51 newbuilding vessels scheduled for delivery in 2015 and 2016. Fully delivered, SALT has a fleet of 60 vessels consisting of 21 Kamsarmaxes, 11 Capesizes, and 28 Ultramaxes.

SALT's current fleet is worth approximately $238M as shown from the valuation information by VesselsValue.com. The new building valuation chart does not reflect the latest new building sales. Adjusting for the 2 tankers ($112M) and the 10 dry bulk vessels (approx. $350M), the remaining fleet to be delivered is worth close to $1.37B. The total current valuation of the fully delivered fleet is approximately $1.6B.

Star Bulk's Fleet: Mixture of Existing and New Vessels

Star Bulk has a fleet of 70 vessels, with 26 additional new building vessels scheduled for 2015 and 2016 deliveries. Fully delivered, SBLK has a fleet of 96 vessels consisting of: 12 Newcastlemaxes, 25 Capesizes, 4 Post-Panamaxes, 20 Kamsarmaxes, 8 Panamaxes, 16 Ultramaxes, 10 Supramaxes, and 1 Handymax.

According to VesselsValue.com, SBLK's fleet of 70 vessels is worth $1.12B, with the remaining new builds worth an additional $1B (note SBLK now has 26 new builds, not 28). Adjusting for the newbuild discrepancy, the total fully-delivered fleet is worth approximately $2.1B.

Comparison and Discussion

SALT's fleet has the advantage of being more homogenous modern on average which will drive some operational efficiencies. SBLK has the advantage of a much smaller orderbook, especially when compared to current fleet size.

SALT has already been forced to slash its planned fleet size from 81 vessels to 60 by sacrificing new assets while SBLK has been able to selectively sell or demolish older vessels to reduce its planned fleet size from 103 to 96.

SBLK's pre-existing fleet and time charters enabled them to remain operationally cash flow positive ($13M positive) during 2014 while SALT was forced to employ destructive bareboat time-charters and burnt through $50M on a far smaller operation. Although SBLK will likely be cash flow negative in 2015, SALT's negative trends will continue and I would consider a $50M burn in 2015 to be a bullish projection. I expect SBLK to burn a smaller amount of cash both on a relative ($/vessel) and nominal (total $) basis.

Exhibit 3: Operational Comparison and Discussion

SBLK's Strong Cash Breakeven Levels & In-house Management

Star Bulk keeps all of their management services in-house (with the exception of procurement services- see page 7), which means they do not have to pay technical or administrative fees to third party companies. Shipping companies often used these arrangements to funnel money to related-party entities, and the arrangement is considered to be part of management's "compensation." SBLK's historical cash breakeven rates are posted below. My chart includes drydock expenses, which drives the breakeven levels up. When most companies report operational expenditures (op-ex) and associated breakeven rates, they often don't discuss these charges nor the impact of interest or G&A.

SBLK incurred larger G&A fees in 2014 due to closing the Excel Maritime fleet acquisition and due to multiple other debt transactions. Going forward, I expect a return to the $11,500 range, but to be fair, I will assume $12k/day for both firms, which is a very gracious assumption for SALT.

The below slide highlights SBLK's huge efficiency gains, which should show during 2015 yearly results as G&A and dry dock expenses become more normalized.

SALT's Unproven Operation Structure and Questionable Related Party Dealings

Unlike SBLK, SALT has not operated long enough to garner a reliable cash breakeven rate. Their recent operations have primarily consisted of chartering-in vessels and trying to flip these time charters back onto the market. As discussed above, this has been a poor strategy choice, with SALT burning through $50M during 2014 alone.

SALT also has related-party dealings for the technical, commercial, and administrative portions of its business (details in the 2014 annual report: pages 73-76). While none of these transactions raise any major red flags, there is huge potential for abuse. The largest questionable policy is issuing $250k in shares for each vessel delivery. This fee was waived for vessels purchased after November 30, 2014, but that's mostly irrelevant since SALT is unlikely to buy any more vessels.

Despite the related-party structure, Scorpio Services (SSH), has actually suffered alongside shareholders considering they made a private purchase of 1.25M shares at $8/sh in July 2013 and 4.14M shares for $3.75 in November 2014. Although Scorpio hasn't been a major offender, I consider the related-party conflicts of interest to be a bearish concern. In the following cash flow estimates, I am giving SALT a $12k/day cash flow estimate, which is generous considering their current structure. Realistically, I expect SBLK to outperform SALT on cash break-even levels for the foreseeable future.

Comparison and Discussion

I expect SALT to have higher management costs, but lower operation expenses due to the more modern fleet. I also expect SALT to have slightly higher utilization, but the (related-party) charter pool fees will negate any relative benefit. I view SALT as more risky on an operational basis, both due to the lack of current secured vessels and due to unknown related-party risks.

Exhibit 4: Pro Forma Cash Flow Comparison

Scorpio: Horrendous Current Market Burn with Large Upside

The below table breaks down SALT's potential cash flow in a variety of market rates. The yellow shading highlights the current market conditions, note the horrendous cash burn of $55-$107M per year. During 2014, SALT burnt $50M in operating cash flow with a far smaller fleet. Remember that SALT also has multiple time-charter in contracts, 9 of which run through all of 2015, and 6 of which run through all of 2016. These vessels are annually burning nearly $2M each on average during the current market rates. The below chart does not include this potential the $20M burn for 2015 nor the $15M burn for 2016.

In a bullish market scenario, assuming zero further dilution and full vessel delivery (both unlikely), SALT has maximum upside of 4.8x based on a current market price of $1.72 for SALT stock. In a medium-market scenario ($15k/$20k), SALT has upside of 62%.

Star Bulk: Similar Struggles with Larger Upside

The yellow shading highlights the current market conditions, note the even larger cash burn of $88-$171M per year. SBLK is attempting to mitigate these flows by signing some long-term charters. A recent example is the three long-term Newcastlemax fixtures announced in December 2014. SBLK is similarly exposed during a weak market, but SBLK lacks the time-charter cash drain and also has a few time charters which should comparatively reduce its losses.

In a bullish market scenario, assuming zero further dilution and full vessel delivery (much more likely than SALT), SBLK has maximum upside of 6.1x based on a current market price of $3.01 for SBLK stock. In a medium-market scenario, SBLK has upside of 90%.

Comparison and Discussion

I believe SBLK is much more likely to survive without further dilution and even if they cut half their order book, they would still have a fairly modern fleet of 83 vessels. If SALT cut half their order book, they would only be left with 35 vessels. In a panic-selling scenario, cash flow potential at SBLK would only drop by 14% whereas SALT cash flow potential would plummet by 42%. In a feasible 30% dilution scenario for both companies, SBLK's higher upside potential makes the dilution less painful for long-term investors. I also believe SBLK is likely to receive slightly higher day-rates than SALT due to their major pooling arrangements, especially in the Capesize realm.

Exhibit 5: Institutional Involvement and Comparative Responses

Private equity entered the dry sector in force during 2013, leading to a repeat supply glut as expected demand growth from India and China failed to materialize at projected levels (in-depth discussion of supply and demand later on).

Star Bulk: Private equity darling including recent dilution

During SBLK's 2013 collapse and subsequent 15-1 reverse-split, Monarch Capital purchased a 3.9M share stake (18.6%), followed by an additional 3.9M share stake (18.6%) by Oaktree Value Opportunities Fund. These two firms grabbed over 1/3 of SBLK during 2013 as it traded in the $5 range with a vision to remake the small family-controlled company into a giant private equity play on a market recovery. This original investment was made when SBLK only had roughly 21M shares outstanding and a market cap of $100M.

Although the recovery never came, Oaktree and Monarch are continuing to increase their shareholdings. Per the latest 13-F filings Oaktree now owns 82.2M shares in SBLK. After adjusting for the May 18 offering (last 13-F only covered up to March 31), I estimate that Oaktree owns 114.5M shares (52.5%). Adjusting for the 5.2% stake announced on May 18, I estimate that Monarch owns 11.3M shares.

Despite the huge dilution in May 2015, the two primary owners (Oaktree and Monarch) continued to keep their stake high. Oaktree is a giant asset management firm (roughly $90B in assets) and Star Bulk is clearly becoming one of their larger operational bets (in terms of ownership more so than market cap). Note the press release following the recent offering, which showcases strong support.

Scorpio Bulkers: Initial private equity support before dilution

Although Oaktree never invested in Scorpio Bulkers, Monarch Capital showed strong initial interest. Monarch started with a stake of 8.5M shares in Q2-14, and they continued to add shares almost every quarter, eventually reaching a 34M share stake in Q1-15. During the same period, Monarch only increased SBLK holdings by 50% (vs. 4x in SALT). Clearly, Monarch was initially more bullish on SALT's prospects. Perhaps, this was due to similar success with Scorpio Tankers (STNG).

SALT also boasted strong institutional ownership at the start of 2015, albeit at a lower combined percentage than SBLK (over 70% versus 50%).

Institutional support was notably absent from Scorpio Bulker's recent offering. This is a key departure from the last offering. Perhaps the institutional investors were unhappy about the value of their equity plummeting 60% in 6.5 months?

Discussion

Despite the 60% drop, these investors aren't alone. SBLK equity also dropped nearly 70% since November 2014 on the open market. The key difference is institutional support for the follow-on offering and the relative pricing spreads. Despite the sharp drop on the open market, the gap between SBLK's two offerings was 36% ($5.00 and $3.20) compared to 60% for SALT ($3.75 and $1.50).

Despite the key discrepancy in support, and the clearly better fleet and operational positioning, SBLK currently trades for 6% below its recent offering while SALT trades at 15% above. This is especially odd considering that SALT is only one small misstep away from another massive round of dilution whereas SBLK has better positioning comparatively. I doubt institutions will 'jump ship' with SALT, but I'm guessing they're seeing the same numbers as this analysis highlights. After getting burnt at $3.75, why risk another huge pie in the face at $1.50?

Exhibit 6: Overall Market Situation and Future Prospects

Current Market Situation

The five-year Baltic Dry Index (BDI) chart highlights the weaknesses this sector has suffered through. Note the tail-end of the strong rates seen in 2010-2011 and a false recovery in late 2013. This false recovery corresponded to massive private equity investment into dry bulk firms. Both Star Bulk and Scorpio were major beneficiaries of this investment cycle, but SALT took far higher leverage and didn't have a pre-existing fleet. The all-time index low of 509 (the BDI was established in 1986) was logged February 18, 2015. The current index reading has improved to 656, but there is hardly any sign of meaningful recovery. Broadly speaking, for these companies to operate profitably, the BDI index needs to consistently stay above an average of 2,000.

The aforementioned private equity supply spike is best highlighted by a slide from SBLK's recent presentation (slide 13). As the slide also highlights, supply growth has ground to a halt. Note this slide is for "orders," and the delivery impact of the 2013-2014 orders will persist until approx. Q2-17.

Future Market Prospects: Supply Side Discussion

The supply-side of the dry bulk picture looks bleak until early 2017, primarily due to the order book discussed above. Demolitions of older vessels will help supply prospects but will be unable to counter-balance the new builds. Assuming 2015 demolitions and 2016 demolitions occur at a rate similar to 2012 (Q1 and early Q2 suggests it will), approximately 65M DWT will be removed from the global fleet of approximately 760 DWT (9% drop). Assuming 75% of the current order book (approx. 150M DWT) is delivered, supply growth through mid-2017 will be approximately 40M DWT, or total growth of 5.3%.

Although this is likely to be a temporary blip, a recent presentation from Baltic Trading shows that scrapping exceeded deliveries in April 2015 for the first time since the early 2000s.

Demand Side Discussion

On the demand side, the largest obstacle to growth is China's recent drop in coal imports. As shown on the Baltic Trading slide below, China's coal imports dropped in 2014 for the first time since 2007.

Although China's imports of coal are poised to drop again in 2015, I do not believe this is a sustainable trend unless China resorts to exorbitant protectionist measures. Australian coal is cheaper and higher-quality than most Chinese production, so I expect imports growth to resume, albeit at a slower pace. The historic growth from 2007-2014 (45% annualized) is clearly unsustainable. I also expect Indian import growth to drop to the mid-teens. This more conservative projection is in-line with Star Bulk's presentation (backed by Clarksons Research data), for a 3.4% growth in 2015 followed by higher growth in 2016. Note Clarkson's also discusses the potential for growth to be closer to 2% in 2015 in a recent blog post (factoring in the projection for negative y/y coal imports).

I personally find SBLK's projections to be a bit too optimistic, and see a 2-3% annual growth reality for the next few years. 2.5% annualized through mid-2017 leads to roughly the same market as today, so I foresee challenges continuing unless India ramps up faster or China changes their protectionist policies.

Another major catalyst for demand growth could be the development of the Trans-Pacific Partnership (TPP), which would boost trade in both the agricultural and forestry categories (approx. one-third of total demand). President Obama is pushing the TPP with primarily Republican support, but I'm not optimistic about its prospects, and think a 2018-2020 target is more feasible.

Bottom line: This is a very tough market and a near-term recovery (within 2 years) is very unlikely. This will be tough for SBLK, but their risk/reward at $3.01 (over 6x of potential long-term upside) leaves them attractively priced. This same reality would be absolutely devastating for SALT, and shareholders could be further diluted and end up owning a fraction of the current company with a fraction of its projected fleet.

Conclusion

The dry bulk market is going through a painful transition period following a massive boom-and-bust in the late 2000s. The market appeared to be recovering in 2013, but a private equity fueled lack of investment discretion led to a "double dip" collapse. SBLK managed their growth better than SALT, but still suffered serious dilution pain. SALT was levered beyond any of its peers and management failed to react while stock prices remained strong. SALT is likely to go down as a business school case of poorly managed growth leading to disastrous investment returns.

Based on superior fleet delivery potential, operational history and scale, upside potential, and institutional involvement: I recommend Star Bulk as a strong candidate for a pair trade against Scorpio Bulkers.

For more conservative speculators, I recommend Diana Shipping (DSX) due to its fortress balance sheet and minimal new building commitments. For investors desiring dry bulk exposure, but with other forms of income diversification, I recommend Navios Maritime Holdings (NM). A strong pair trade argument could be structured using either DSX or NM against SALT, but I wanted the two companies to be as identical as possible. I personally have dry bulk market exposure through SBLK, NM, and DryShips (DRYS). I sold half my SALT shares at $2.69 in mid-May (loss of 5% in 5m), and $1.61 (loss of 20% in 7m) this week.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Disclosure: The author is long SBLK, DRYS, NM, STNG. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.