Star Bulk Carriers : Where There Is Shipping There Is Hope

SBLK : NASDAQ : US$13.82 BUY 
Target: US$22.00

COMPANY DESCRIPTION:
Star Bulk Carriers is a global dry bulk shipping company
incorporated in the Marshall Islands in December 2006.
The company is headquartered in Athens, Greece and
specializes in the Capesize and Supramax segments of
dry bulk.

Energy — Maritime
EXCEL-LENT ACQUISITION
Investment recommendation
Earnings results came in higher than our estimates and slightly below
the consensus as Star Bulk benefited from a higher-than-expected Q2
dry bulk market. In addition, Star Bulk announced the acquisition of
Excel Maritime’s 34 dry bulk vessels. This acquisition will further
solidify Star Bulk as the largest US-listed dry bulk carrier and as such
we reiterate our BUY rating and our price target of $22.
Investment highlights
 Star bulk continues its consolidation spree: The Company
announced it agreed to acquire the old Excel Maritime fleet, which
was primarily controlled by Oaktree, in an NAV for NAV
transaction. We expected this to be the next step in the company’s
path to be a consolidator within the dry bulk sector. Ultimately, we
believe SBLK’s eventual size, scale, and liquidity will be highly
attractive for institutional investors looking to invest in the industry
and help create access to capital that will facilitate that role as a
consolidator.
 Operational efficiency: Star Bulk generated $2.2 million of cash
despite the soft Q2/14 dry bulk market due to their low operating
and G&A expenses.
Valuation
Based on our expected 2016 year-end balance sheet and fully delivered
fleet at that time, we calculate Star Bulk’s forward, normalized NAV to
be $22.51 per share. As such we believe that SBLK is undervalued and
we maintain our BUY rating and $22 price target. Our target is based on
the average of our two forward NAVs.

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