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BULK-NO (BUY, TP 157) Update: Accretive Fleet Expansion

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GoodBulk continues its rapid growth, acquiring seven modern Capesizes from CarVal (Cargill) with options for a further six. We believe the deal is highly accretive to current GoodBulk shareholders (NOK 5.7/sh), with the optionality on six more vessels adding upside. Comparative to recent S&P transactions, we estimate a steel discount of 6-13%. We reiterate our BUY and raise our TP to 157 (153).

Vessel acquisitions: The company announced on Friday the acquisition of seven firm Capes from CarVal (a subsidiary of Cargill) with options for another six. Without too much details being disclosed, we believe the firm vessels could be some or all of these:

The acquisition will be financed by issuing 10.5m new shares to CarVal and the assumption of USD 61m in existing debt.

Valuation: We estimate a fair value for the acquired vessels at $209m. Adjusting for debt, the NAV-contribution from CarVal is 47% of NewCo. CarVal will only hold 44% if the shares in the NewCo, and hence we believe the deal is highly accretive to current GoodBulk shareholders (NOK 5.7/sh). With this NAV-for-NAV approach, the discount on the vessels is 6%. The implied purchase price is below the 2011-built Cape Claudine at $30.5m in September, two 2016-built Capes bough by Golden Ocean at $43m each and Choully at $44m in October. Using last close, the discount to steel is 13%.

Source: Gersemi Research, Bloomberg, company data

Disclaimer: The publisher currently owns shares in the company. More disclaimers at the end of this document