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SHIP Sails Aloft in Recovering Dry Bulk Shipping Industry

|Includes: Seanergy Maritime Holdings Corp (SHIP)

Global trade as we know it would not exist without the maritime shipping industry. According to Shipping Facts, an industry website operated by a coalition of international shipping associations, about 90% of world trade is handled by the international shipping industry, which contributes approximately $380 billion in freight rates to the global economy on an annual basis. “Without shipping,” the website states, “intercontinental trade, the bulk transport of raw materials, and the import/export of affordable food and manufactured goods would simply not be possible.”

The dry bulk shipping industry, which transports raw materials such as fossil fuels and grains, is a particularly vital component of international trade—and one that’s ready for a resurgence. A recent commentary by analyst David Sterman of Street Authority posits that the dry-shipping industry is poised for gains. Among the evidence: the Baltic Dry Index (BDI), a measure of shipping rates for dry goods, is bouncing back from its recent free-fall. The index had dropped almost 60% since May due to decreased demand for raw materials in China and an oversupply of new ships resulting from the 2008 shipping boom. However, the BDI stabilized and rose 7.5% over the past week. Many consider the BDI an indicator of future global economic growth, as rising demand for raw materials suggests increasing production activity. Demand for raw materials is climbing in China (which is expected to import 610 million tons of iron ore in 2010, approaching 2009’s record of 628 million tons), the U.S. and Europe are moving toward economic recovery, and freight rates are once again rising. These encouraging signs may point to a rebound for the shipping industry.

Companies such as Seanergy Maritime Holdings Corp. (NasdaqGM: SHIP) are positioned to profit from increased demand for dry goods shipping. Seanergy, based in the Marshall Islands with its executive office in Athens, Greece, is engaged in the transportation of dry bulk cargoes through the ownership and operation of dry bulk carriers. Seanergy controls a fleet of 20 vessels, classified into 5 categories based on their carrying capacity. The fleet carries a variety of dry bulk commodities, including coal, iron ore, and grains, as well as bauxite, phosphate, fertilizer and steel products.

SHIP has achieved profitability through its successful rapid-growth strategy and advantageous acquisitions. By acquiring dry bulk carriers of various sizes, Seanergy is able to serve the different needs of a variety of charterers. The Company has completed three transactions since 2008, most recently gaining control of nine Handysize carriers from Maritime Capital Shipping Ltd (NYSE:MCS). Finally, the Company’s relationship with the Restis family and its affiliates, which have a proven track record of more than 40 years in dry bulk shipping, allows SHIP to take advantage of economies of scale and efficiencies resulting from the use of Restis affiliates for the technical and commercial management of its fleet.

SHIP reported strong first quarter earnings, bringing their trailing twelve months total to $79.8 million in revenue and $18.2 million in net income. The Company’s current cash position is $52.8 million after the recent $33 million acquisition of MCS. Seanergy currently has some 95% of its fleet under contract for calendar 2010 and 51% booked for 2011. With its secured revenue and strong balance sheet, Seanergy (SHIP) is well-equipped to sail ahead of other transportation stocks.

Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.



Disclosure: SHIP is a client of RedChip.