Seanergy Maritime Holdings Corp. (NASDAQ:SHIP) is a stock we covered recently, noting its potential for a sudden explosive move higher. That sentiment was well demonstrated by the stock’s move on Wednesday, as it blasted higher by nearly 22% at one point, closing up over 13%. That move was helped along by a press release out of the company that its new corporate presentation had been posted to the company’s website.
Many of the details highlighted in a very persuasive PowerPoint serve to spotlight some of the themes we discussed in our recent coverage of the company. However, it may be the case that the market needed reminding how remarkable the current state of value here may be, as well as that of the dry bulk shipping space as a whole. Similar points have been made by the likes of DryShips Inc. (NASDAQ:DRYS), Navios Maritime Holdings Inc. (NYSE:NM), Diana Shipping Inc. (NYSE:DSX), and Star Bulk Carriers Corp. (NASDAQ:SBLK).
Seanergy Maritime Holdings Corp. (NASDAQ:SHIP) is, for those not familiar with the company, an international shipping company specializing in the worldwide seaborne transportation of drybulk commodities.
The company has already been through a relatively recent restructuring and emergence, which we will detail in a moment. Suffice it to say, this was a streamlined situation before its recent deep value extension lower.
In March 2014, the company completed its restructuring, following which it did not own any vessels. During 2015, the company acquired eight drybulk vessels, comprising six Capesize and two Supramax, and acquired an additional two Capesize vessels between November and December 2016. They also added an additional Capesize vessel on a second hand basis that should be soon in the company’s hands (expected to be delivered between May 25, 2017 and July 17, 2017).
“We believe we have established a reputation in the international drybulk shipping industry for operating and maintaining vessels with high standards of performance, reliability and safety. We have assembled a management team comprised of executives who have extensive experience operating large and diversified fleets, and who have strong ties to a number of international charterers.”
The company was incorporated under the laws of the Republic of the Marshall Islands, pursuant to the BCA, on January 4, 2008, originally under the name Seanergy Merger Corp. The name was changed to Seanergy Maritime Holdings Corp. on July 11, 2008
The prior restructuring even ran its course between 2012 and 2014, as follows: In August 2012, the company began discussions with former lenders to finalize the satisfaction and release of the company’s obligations under certain of its former loan facility agreements and the amendment of the terms of certain of the company’s loan facility agreements.
Between January 2012 and March 2014, the company sold all 20 of its former vessels, in some cases by transferring ownership of certain of the company’s vessel-owning subsidiaries to third parties nominated by its former lenders in connection with the company’s restructuring.
The company’s corporate presentation was a simple set of facts, which is why it’s so interesting to see such a dramatic impact on the stock’s trading tone.
Naturally, as most traders know by now, the dry bulk shippers can be some of the most volatile stocks in the market. These guys are as cyclical as it gets, turning with shifts in demand for heavy materials often found at the heart of major construction projects in need of flat rolled steel, copper, iron ore, lumber, and other basic materials.
While they also transport things like grains or food stuffs as well, those tend to be less cyclical. So, it’s the heavy industrial commodity transportation that often defines the trend for these stocks.
The company’s presentation noted that, from a macro perspective, the global growth in dry bulk shipping fleets was just 2% in 2016, which was also the lowest in the past 15 years. As one would instinctively assume, the dry bulk shipping market is a simple economic complex, with the process functioning according to the laws of supply and demand. If you limit the supply of dry bulk shipping capacity and then accelerate the demand level, you are going to get a very simple response from the system: higher pricing margins for those provide that capacity.
At this point, we know that the second derivative change in capacity is at a 15-year low. But what about demand?
As we have noted, demand growth is possibly situated to accelerate based on policy changes in India, China, and the US – all of which have recently pushed in the direction of action plans to coordinate infrastructure-based stimulus programs.
All of that infrastructure heightens demands on dry bulk carriers of materials involved in building things like airports, highways, hospitals, bridges, and the like. And the concrete, sand, copper, steel, iron ore, coal, and lumber have to be moved around to get the job done. The whole picture, according to many analysts, represents the most dramatic infrastructure program ever to press into action in the history of the world.
With the dry bulk carriers in a structural bear market for more than the past 8 years into these programs, one wonders if we are nearing a key inflection of historic proportions. With its recently rebuilt fleet and small trading float, SHIP shares may have earned a well-deserved look.