EuroDry Ltd. (NASDAQ: EDRY) operates in the dry cargo, drybulk shipping markets. EuroDry’s operations are managed by Eurobulk Ltd., an ISO 9001:2008 and ISO 14001:2004 certified affiliated ship management company and Eurobulk (Far East) Ltd. Inc., which are responsible for the day-to-day commercial and technical management and operations of the vessels. EuroDry employs its vessels on spot and period charters and through pool arrangements.
EuroDry Ltd. was formed on January 8, 2018 as a spin off from Euroseas Ltd under the laws of the Republic of the Marshall Islands and as of May 31, 2018, trades on the NASDAQ Capital Market under the ticker EDRY.
EDRY shares traded in the range of ~ $7.00 to $9.00 per share since their listing on the NASDAQ in late May, with volumes in the hundreds of shares. On Wednesday, September 26, 2018, EDRY shares hit a high of $12.90 with hundreds of thousands of shares being traded.
The Company has a fleet of 6 vessels, including 2 Kamsarmax drybulk carriers, 3 Panamax drybulk carriers, 1 Ultramax drybulk carrier with a total cargo capacity of 453,086 dwt. On average, 5.6 vessels were owned and operated during the second quarter of 2018 earning an average time charter equivalent rate of $12,069 per day compared to 5.0 vessels in the same period of 2017 earning on average $9,429 per day.
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Key business strategy components:
Renew and Expand the Fleet. Grow the fleet in a disciplined manner through timely and selective acquisitions of quality vessels. Perform in-depth technical review and financial analysis of each potential acquisition and only purchase vessels as market opportunities present themselves. Focus on purchasing well-maintained secondhand vessels, newbuildings or newbuilding resales based on the evaluation of each investment option at the time it is made. In 2016 they took delivery of one newbuilding drybulk carrier. In January 2017, they took delivery of one secondhand and one newbuilding drybulk carrier. In addition, in March 2017, they signed an addendum to their newbuilding contract with Jiangsu Tianyuan Marine Import & Export Co., Ltd., and Jiangsu Yangzijiang Shipbuilding Co., Ltd. and Jiangsu New Yangzi Shipbuilding Co., Ltd. to proceed with the construction of an 82,000 dwt bulk carrier which they took delivery of on May 7, 2018.
Maintain Balanced Employment. They intend to employ their fleet on either longer-term time charters, i.e. charters with duration of more than a year, or shorter-term time/spot charters. Seek longer term time charter employment to obtain adequate cash flow to cover as much as possible of the fleet’s recurring costs, consisting of vessel operating expenses, management fees, general and administrative expenses, interest expense and drydocking costs for the upcoming 12-month period. May also use forward freight agreements (“FFA” or “FFAs”) – as a substitute for time charter employment – to partly provide coverage for their drybulk vessels in order to increase the predictability of revenues. Look to deploy the remainder of the fleet on spot charters, shipping pools or contracts of affreightment depending on their view of the direction of the markets and other tactical or strategic considerations. When they expect charter rates to improve they try to increase the percentage of the fleet employed in shorter term contracts (allowing them to take advantage of higher rates in the future), while when they expect the market to weaken they try to increase the percentage of our fleet employed in longer term contracts (allowing us to take advantage of higher current rates). They believe this balanced employment strategy will provide more predictable operating cash flows and sufficient downside protection, while allowing them to participate in the potential upside of the spot market during periods of rising charter rates.
Operate a Fleet of Drybulk Vessels. They will primarily focus on the Handy to Kamsarmax ship segments of the drybulk market, which have, historically, been less volatile than the largest, Capesize, segment.
Optimize Use of Financial Leverage. They intend to use bank debt to partly fund vessel acquisitions and increase financial returns for shareholders. Actively assess the level of debt incurred in light of their ability to repay that debt based on the level of cash flow generated from the chartering strategy and efficient operating cost structure.
About
EuroDry Ltd. (NASDAQ: EDRY) operates in the dry cargo, drybulk shipping markets. EuroDry’s operations are managed by Eurobulk Ltd., an ISO 9001:2008 and ISO 14001:2004 certified affiliated ship management company and Eurobulk (Far East) Ltd. Inc., which are responsible for the day-to-day commercial and technical management and operations of the vessels. EuroDry employs its vessels on spot and period charters and through pool arrangements. The Company has a fleet of 6 vessels, including 2 Kamsarmax drybulk carriers, 3 Panamax drybulk carriers, 1 Ultramax drybulk carrier with a total cargo capacity of 453,086 dwt. On average, 5.6 vessels were owned and operated during the second quarter of 2018 earning an average time charter equivalent rate of $12,069 per day compared to 5.0 vessels in the same period of 2017 earning on average $9,429 per day.
Analysts
2 Wall Street analysts have issued ratings and price targets for EuroDry in the last 12 months. Their average twelve-month price target is $12.50, suggesting that the stock has a possible upside of 17.26%. The high price target for EDRY is $13.00 and the low-price target for EDRY is $12.00. There are currently 2 buy ratings for the stock, resulting in a consensus rating of “Buy.”
Date Brokerage Action Rating Price Target
6/27/2018 Noble Financial Initiated Coverage Buy $12.00
6/15/2018 Maxim Group Initiated Coverage Buy $13.00
Financial review
For the second quarter of 2018, the Company reported total net revenues of $6.1 million representing a 29.1% increase over total net revenues of $4.7 million during the second quarter of 2017.
The Company reported net income for the period of $0.5 million and net income attributable to common shareholders of $0.4 million, as compared to a net loss and a net loss attributable to common shareholders of $0.3 million for the same period of 2017.
Depreciation expenses for the second quarter of 2018 amounted to $1.3 million compared to $1.2 million for the same period of 2017.
Interest and other financing costs for the second quarter of 2018 amounted to $0.62 million compared to $0.50 million for the same period of 2017.
Adjusted EBITDA for the second quarter of 2018 was $2.4 million compared to $1.4 million achieved during the second quarter of 2017.
Stock influences and risk factors
Continuing pricing improvement in the dryship sector may act as a catalyst for EDRY shares.
The shipping industry is subject to much regulation and the company’s operations could be impacted in the future.
The shipping industry is cyclical, and the company may not have sufficient cash in the future to operate during a revenue slump.
The shipping industry is highly competitive and EDRY will have to compete with larger, better financed companies.
Stock chart
On Wednesday, September 26, 2018, EDRY shares were at $10.01 on traded volume of 424K shares. The current RSI (14) is 81.92
At $10.01, EDRY shares are trading above their 50 DMA of $7.23. The 200 DMA is undefined.
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