Trading Alert : Shipping Sector JUMPS with Baltic Dry Index ( BDI)


30 November 2013

Baltic Dry Index (BDI)    +102   1821 
Rates

BCI

(Cape index)

BPI

(Panamax index)

BSI

(Supramax index)
INDEX

3089

+241

1665

+52

1475

+17

SPOT 4 TCE AVG (USD)

24611

+2892

13293

+413

15424

+177

YESTERDAY (USD)

21719

12880

15247

YEAR AGO (USD)

15869

7815 8005

Jack A. Bass Managed Accounts Celebrates with DRYS, DSX. SB

DIANA SHIPPING INC(DSX:NYSE, US)

BuySell
11.50USDIncrease0.23(2.04%)Volume:
Average
As of 29 Nov 2013 at 10:33 AM EST.
Open 11.54 P/E Ratio (TTM) 102.4x
Last Bid/Size 11.50 / 2 EPS (TTM) 0.11
Last Ask/Size 11.51 / 24 Next Earnings 18 Mar 2014
Previous Close 11.27 Beta 1.27
Volume 298,455 Last Dividend
Average Volume 1,298,530 Dividend Yield 0.00%
Day High 11.55 Ex-Dividend Date
Day Low 11.34 Shares Outstanding 82.2M
52 Week High 13.24 # of Floating Shares 67.12071M
52 Week Low 7.16 Short Interest as % of Float 4.40%
chart

DRYSHIPS INC(DRYS:NASDAQ, US)

BuySell
3.46USDIncrease0.17(5.17%)Volume:
Above Average
As of 29 Nov 2013 at 10:39 AM EST.

QUOTE DETAILS

Open 3.50 P/E Ratio (TTM)
Last Bid/Size 3.46 / 240 EPS (TTM) -0.83
Last Ask/Size 3.47 / 157 Next Earnings
Previous Close 3.29 Beta 2.93
Volume 9,413,560 Last Dividend
Average Volume 7,000,101 Dividend Yield 0.00%
Day High 3.55 Ex-Dividend Date
Day Low 3.45 Shares Outstanding 403.8M
52 Week High 4.00 # of Floating Shares 347.1371M
52 Week Low 1.53 Short Interest as % of Float 4.03%

SAFE BULKERS INC(SB:NYSE, US)

BuySell
7.70USDIncrease0.06(0.79%)Volume:
Average
As of 29 Nov 2013 at 10:43 AM EST.

QUOTE DETAILS

Open 7.72 P/E Ratio (TTM) 6.3x
Last Bid/Size 7.68 / 5 EPS (TTM) 1.21
Last Ask/Size 7.70 / 2 Next Earnings 17 Feb 2014
Previous Close 7.64 Beta 1.68
Volume 60,053 Quarterly Dividend 0.0600
Average Volume 294,469 Dividend Yield 3.12%
Day High 7.81 Ex-Dividend Date 20 Nov 2013
Day Low 7.66 Shares Outstanding 82.7M
52 Week High 9.00 # of Floating Shares 41.23326M
52 Week Low 3.12 Short Interest as % of Float 2.03%

Workday Target $90

WDAY : NYSE : US$73.30
BUY 
Target: US$90.00

COMPANY DESCRIPTION:
Workday provides enterprise-scale, cloud applications that deliver the core functions for global customers to manage the human capital and financial resources of an organization. Solutions include: HCM, Financial Management, Payroll, Time Tracking, Procurement, Employee Expense Management, etc. Workday was founded by the former founders of PeopleSoft in 2005 and is headquartered in Pleasanton, CA.
All amounts in US$ unless otherwise noted.

Technology — Enterprise Software — Software as a Service
ANOTHER EXCEPTIONALLY STRONG QUARTER, LIKELY MORE TO COME. REITERATE BUY, $90 TARGET
While high valuation momentum stocks have taken a breather this quarter as
many investors locked in good YTD performance, Workday, the company,
continues to execute quite well. The firm is a large deal shop, selling to large
firms in big chunks. Our view is that the pivot point for the business will be
several reference customer successes with financials. If that happens around
summer 2014, Workday is very likely to see a cascading list of customers switch
from Oracle and to some degree SAP and perhaps a few Microsoft customers.
With the stock valued at an eye-watering 17x 2014E revenues, Workday will
need to deliver those kind of epic results for the stock to continue working. At
this point, we expect that to happen and for WDAY shares to continue to
bulldoze doubters and short-sellers.
 The trend continues: another material upside. Workday reported revenues, calculated billings, and FCF loss of $127.9M (+76% y-o-y), $154.0M (+99%) and ($9.7M), which were respectively $10M, $21M, and $23M better than
our estimates. Subscription revenues grew 82% in the quarter, and non- GAAP EPS loss of ($0.12) was $0.05 better than we expected.
 Color from the call. Workday now has more than 550 customers worldwide, with approximately 2/3 currently live on the system. The firm added 10 new Financials customers in the quarter, which was a company record.
 Outlook: mid-point Q4 revenues ~$7M ahead of consensus. Rolling forward WDAY’s subscription revenue upside and improved outlook, we have increased our F2015 and F2016 revenue estimates by $30M and $20M respectively, which implies ~50% revenue growth next year. We continue to expect WDAY to show FCF profitability at some point in 2H/F16.

Abengoa, S.A.

ABGB : NASDAQ : US$11.78
ABG : MCE
BUY 
Target: US$18.00

COMPANY DESCRIPTION:
Abengoa is a leading provider of technology and innovation to sustainability markets worldwide. With a platform focused on E&C, concessions and industrial products, the company has built a strong and growing presence in solar and biofuels production, T&D lines, water desalination, recycling and IT-related end markets.
All amounts in US$ unless otherwise noted.

Sustainability — Energy & Power Technologies GETTING UNDERWAY IN AMERICA;
MAINTAIN BUY, ESTABLISH NASDAQ TARGET AT $18
Investment recommendation
We continue to like the longer-term prospects, as management’s deleveraging strategy progresses on plan and the core business shows resilience across the energy and environmental end-market.
Investment highlights
 After raising $609M (gross) from the long-awaited U.S. IPO (50M ADS shares priced at $12.18/€1.80) in mid-October – , we offer fresh estimates and perspective.
 The reinforced capital structure (corporate leverage at ~2.5x) helps support the path to positive FCF in ’14 as E&C continues to outperform and ~€130M in extra Concession EBITDA ramps in ‘14.
 The main risks near term remain the impact of RFS dynamics and solar tariffs, though we find that our revised estimates provide adequate coverage there.
 Our estimates adjust for the deal and risks noted. 2013E rev/EBITDA/EPS go to €7.26B/€1.21B/€0.20 from €7.25B/ €1.2B/€0.31. 2014E goes to €7.40B/€1.24B/€0.05 from €7.5B/€1.27B/€0.35 (no rotations incl.).
Valuation
We are establishing a target for the company’s NASDAQ-listed shares of $18.00 based on a multiple of ~7.5x ’14 EV/EBITDA (no change). This target takes into account the 5:1 ADS-to-Madrid B share conversion ratio and a EUR/USD exchange rate of 1.35.

NxStage Medical BUY Target Price $ 18

NXTM : NASDAQ : US$9.65
BUY 
Target: US$18.00

COMPANY DESCRIPTION:
NxStage Medical, founded in 1998, develops, manufactures and sells a portable (home) hemodialysis system, the System One. The System One is the smallest, commercially available hemodialysis system. The company is committed to improving the quality of life and clinical outcomes for hemodialysis patients suffering from ESRD.
All amounts in US$ unless otherwise noted.

Life Sciences — Biomedical Devices and Services
FINAL RULE BOOSTS TRAINING REIMBURSEMENT FOR HHD BY 50%;
NOT A SEA CHANGE BUT STEP IN THE RIGHT DIRECTION; MAIN BUY, $18 PT
Investment recommendation
We maintain our BUY rating following the announcement that the 2014 CMS final rule for dialysis policies and payments included a 50% increase to reimbursement rates for home and peritoneal dialysis. This comes as a surprise given the preliminary rule released in June did not include any adjustments in 2014. That said, we note that improving
reimbursement is a marathon, not a sprint, and the increase to the home training rate is one of many iterative changes necessary to even the playing field and reduce the barriers to entry for both patients and physicians. As such, we do not expect a bolus of patients in 2014 but do view the improvement positively and remain encouraged that CMS
continues to evaluate this therapy and listen to feedback from industry, patients, and providers.
Investment highlights
 The 2014 CMS final rule for dialysis policies and payment rates included a 50% increase in the reimbursement rate for training home dialysis patients.
 Training reimbursement rates will increase to $50.16, on January 1, 2014, from $33.44 previously. Training hours were left unchanged at 25.
Valuation
We are maintaining our price target to $18.00, based on an EV/sales analysis.

Nuance Communications BOTTOM IN GROWTH DECLINES ?

NUAN : NASDAQ : US$15.99
BUY 
Target: US$22.00

COMPANY DESCRIPTION:
Nuance is a leading provider of speech recognition, dictation and imaging solutions to both businesses and consumers. It offers these solutions to call centers, healthcare companies and desktop and mobile device manufacturers.
All amounts in US$ unless otherwise noted.

Technology — Enterprise Software — Infrastructure
IT’S ALWAYS DARKEST BEFORE… AN AS-EXPECTED QUARTER, PERHAPS A BOTTOM IN GROWTH DECLINES.
As cathartic as it would be to scream and downgrade NUAN shares on what we
have been telling investors would be a middling quarter, the fact is that we
strongly believe this would be a classic sell-side move – to downgrade at the
bottom. We believe NUAN will look like CTCT 12-18 months from now – which
means that epic despondency will reverse to at least reluctant admission that
the firm has value. For those investors who are able to own stocks on that
duration, we believe NUAN shares are worth retaining if not adding to as the
consensus panics.
 An in-line quarter. While slightly below our high-end of the range estimates,
Nuance’s FQ4 non-GAAP revenue and EPS of $490M and $0.30 were in-line
with consensus. Total revenues declined (9%) organically in the quarter,
which brought F2013 organic growth to (3%). Operating margins ended the
fiscal year at ~28%, which was down from nearly 36% in F2012.
 Segment performance. Revenues declined on an organic basis in each
business unit, led by a 24% decline in the mobile segment as revenues
transition towards an on-demand model and some segment headwinds
persist. In Healthcare, the firm’s largest segment, revenues declined 2%
organically as NUAN successfully signed new customers for its Clintegrity
solutions, but noted continued EMR erosion of core transcription revenue.
 Outlook: mid-single digit growth and margin compression next year.
Guidance suggest F2014 revenue growth in the ~5% range and operating margins of ~22.5%, which is down 550 bps y-o-y. On the upside, Nuance will start to report bookings as the business continue to shift towards on demand revenue lines – bookings are expected to grow ~15% in F2014.

Synergy Pharmaceuticals

SGYP : NASDAQ : US$4.27
BUY 
Target: US$10.00

COMPANY DESCRIPTION:
Synergy Pharmaceuticals is a developmental stage biopharmaceutical company that focuses on the development of drugs to treat gastrointestinal disorders. Synergy’s lead investigational drug, plecanatide, is an analogue of urogyanylin, a natural hormone, and activates GC-C receptors that increase the flow of water into the intestine. Plecanatide is currently being tested in a Phase 2b/3 trial in patients with chronic constipation.
All amounts in US$ unless otherwise noted.

Life Sciences — Biotechnology
Q3/13: INITIATION OF PH3 CIC TRIAL, DATA READOUT IN Q2/14
Investment recommendation
Reiterate BUY, $10 target on clinical and commercial promise of plecanatide in CC and IBS-C. We see clear unmet need in chronic idiopathic constipation (CIC) patients who don’t respond to or have unacceptable AEs on current therapies. Compared to Linzess (Forest Laboratories / Ironwood Pharmaceuticals), plecanatide may have better tolerability (no diarrhea in Phase 2a, better dose-response). We also see the CIC and IBS-C market as being large enough to support two or even more effective drugs. Our $10 target is based on a pNPV analysis.
Investment highlights
 Q3:13 EPS of $(0.15) vs. consensus of $(0.17) and our $(0.14) estimate.
 Ph3 underway as planned: data in 2015; Phase 2 IBS-c data likely in late Q1/14. SGYP recently kicked off a 1350pt, 180 sites, 12-week 2-dose Ph3 trial for plecanatide in CIC after its recent end-of-Ph2 meeting. We expect data similar to positive Ph2b data around end of 2014. We continue to expect both data sets to be positive and support approval.
 SP-333 Ph2 trial in Opioid Induced Constipation (OIC) likely to yield data in mid 2014. SGYP recently initiated Ph2 OIC study of SP-333, a 2nd gen, oral qd GC-C agonist. Amitiza is the only drug approved for OIC, but does not work in methadone patients due to competitive inhibition

George Soros Invested in Dry Ships and Diana Shipping

George Soros’ investment firm recently purchased 590,278 shares of DryShips (NASDAQ:DRYS  ) and 77,942 shares of Diana Shipping (NYSE: DSX  ) . That comes out to a $1.8 million stake in DryShips and an $841,000 stake in Diana Shipping. Soros’ firm currently manages right around $6.8 billion spread across 2,333 holdings, so these additions are a very small portion of the total portfolio. The firm also owns small positions in NaviosMaritime Holdings and Navios Partners.

Whether it’s Soros himself or his fund managers, it appears his company is making a small bet on the dry bulk shipping sector, with DryShips and Diana Shipping leading the pack. So just what would motivate Soros to invest in this sector?

Some history on Soros’ motivations for speculating
Looking at Soros’ biography in Money Masters of Our Time by John Train, Soros is known as a speculator by nature, with an ability to trade in and out of positions quickly using margin debt. His strategy revolves around three main points, according to Train:

  1. Start small, and then if things work out, build the position bigger.
  2. He doesn’t need to know everything about a particular investment, just enough to have an edge on the market.
  3. He has to correctly judge the risk inherent in a position the moment it’s established.

But why is he investing in dry bulk shipping?

It appears from the first point that Soros’ firm may be building an initial position, with the potential to add later if the strategy seems to be working. This strategy is most likely centered on a predicted shipping rate rebound in 2014 and 2015,

Nonetheless, speculating on exactly why Soros’ firm is investing in DryShips and Diana Shipping isn’t the best use of time in this case. For investors, a quick look at Soros’ methodology shows he’s a macro-trader by nature, with a propensity to enter and exit large positions quickly. Soros’ firm is probably investing in multiple companies to try to speculate on a industry wide rebound following the lead of Jack A. Bass Managed Accounts.