Greek Shipping News Cuts
Week 03 - 2008


Port privatisation ratified

---The board of Thessaloniki Port Organisation on Tuesday approved a plan to privatise the port's container terminal facilities, even as minor scuffles broke out between police and protesting port workers taking part in a rally outside the main gate of the port.
The Port Organisation's board ratified a tender for the concession of exploitation rights to the container terminal, following a similar decision taken by the Piraeus Port Organisation last week.
Speaking to ANA-MPA, Lazaros Kanavouras, chairman of Thessaloniki Port Organisation expressed confidence that the board has done an excellent job in drafting the privatisation tender and noted that the full text of the tender will be posted on the Internet on Wednesday.
Kanavouras said the privatisation of the container terminal will benefit the workers and noted that the management was willing to satisfy workers' demands as much as possible. He noted that the board's decision highlighted the state's determination to proceed with the port's privatisation.
Meanwhile, port workers said they planned to annul both decisions and announced labour mobilisation actions from January 31.
The Federation of Greek Chemical Industries on Tuesday expressed its concern over problems likely to emerge as a result of strike action in the country's two largest ports, saying this action could negatively affect the operation of the sector. Speaking to reporters, Armodios Giannidis, president of the Federation, said the sector suffered huge cost and operation problems, since its activities focused more on exports.
Caption: Riot police remove a protestor setting up a banner during a blockade set up by workers at Thessaloniki port to protest against plans for the privatisation of its container terminal on Tuesday, January 15, 2008. ANA/MPA - Nikos Arvanitidis

---Sun, 20 Jan 2008. Andros Payiatsos, Xekinima, CWI Greece, Athens
Complete paralysis of absolutely everything and massive demos in all major cities of Greece were the results of the general strike by the Greek Trade Unions on 12 December
An initially routine call by the Unions led to a massive response
Government plans
The plans of the government are to raise all retirement ages to 65 years of age, and to cut pensions by up to one third.
Liars, hypocrites and robbers.
The Institute of Labour of the Trade Union Confederation has estimated that if all the wealth of the pension and health funds was left intact, then not only there would be no deficits but that there would be enough funds to pay a pension of 1,000 euro per month to every Greek worker.
What is clear, and more and more Greek workers and youth have begun to understand, is that the policy of the bourgeoisie is to take the pension and health funds into its hands, use them for their own profit and then make the workers pay for the deficits that they cause. There is not the slightest exaggeration in this claim. Also, by cutting down pensions and health services they force bigger and bigger numbers of people to go to the private insurance companies and hospitals.
Angry workers
The power, the determination and the anger of Greek workers is such that, if it was correctly channelled and organised by the trade union leaders, this present government with a fragile majority of 152 out of 300 MPs would be looking for a place to hide.
What do 84% really want?
And conciliatory trade union leaders
The truth of the matter is that the only reason why this government is still in office is because the leadership of the opposition party, PASOK, and the leaders of the trade unions who are controlled by PASOK are not willing to really fight against government policies. Their aim is some kind of compromise. Therefore, they mobilise the workers only to force the government to a partial retreat, but not to a complete defeat.
Because in order to really defend the pensions of the Greek workers and safeguard the viability of the social security system, they would have to fight to:
* Get back the 83 billion euro (about 40% of GDP) stolen from the pension funds by industrialists, ship owners and bankers.
* Force the government to pay what it owes to the funds, i.e. 12.4 billion euro and pay its dues every year, i.e. 1% of GDP.
* Force the private sector employers to pay their dues, otherwise face heavy penalties.
* Nationalise the pharmaceutical companies who profiteer on drugs and squeeze huge amounts of money out of the social security system.
If such measures are not taken, there is no way that the crisis of the social security funds will be solved.
But there is no way that these measures would be accepted by the capitalists and by their governments. Thus, the struggle for pensions and for a proper national health service goes hand in hand with the struggle for the overthrow of the power of the capitalists and for a socialist society.
The next day
The day after the general strike found Greek workers with a high morale and the government wavering. The ND government will not retreat; it will push as hard as possible for the best deal in the interests of capital. But the huge success of the strike shows that it is possible for the working class to force the government into full retreat.
Already, in large sections of the working class, there is talk of the need for another strike to follow the 12 December one.
What is required, however, is not just another strike, but a full strike plan to be extended over the next period. What is required is a 48-hour strike to follow the last 24-hour one. Its date should be announced as soon as possible, so as to warn the government about what is coming and to increase the already existing frictions in its ranks.
January should be planned as a month of general strikes. If the government does not retreat after a 48-hours strike, then further action by the working class in a coordinated and continuous manner could lead the government and the economy into complete paralysis. No government would be able to stand up against such a movement.
There is not the slightest doubt that, faced with the prospect of a massive attacks on their pension rights, Greek workers would be willing to strike not for one or two days but for weeks!

Greece gathers its 'Dream Team'
---How many people out there remember the song "I'm Sitting on Top of the World"?
It may have been written around 1926 but it could be the refrain on the lips of the Greeks in shipping these days.
In addition to controlling the largest merchant fleet in the world, the Greek shipping community can claim the unusual honour of having compatriots at the head of the five major international shipping organisations at the moment.
To mark and celebrate what, according to Greek shipping minister George Voulgarakis is statistically about a zero likelihood, the Marine Club of Piraeus arranged an event where all five were honoured.
Marine Club president John Xylas aptly called the recipients, Efthimios Mitropoulos, secretary-general of the International Maritime Organisation (IMO), Spyros Polemis, president of the International Chamber of Shipping (ICS)/International Shipping Federation (ISF), Nicky Papadakis, chairman of Intercargo, Nick Fistes, chairman of Intertanko, and Philippe Embiricos, president of Bimco, the "Dream Team" of Greek shipping.
All the heavy-weight names in Greek shipping were on hand, including Captain Panayiotis Tsakos, son Nikolas and daughter Maria, Captain Vassilis Constantakopoulos, Spyros Karnessis, brothers George and Dimitris Procopiou, Victor Restis, George and Stathis Gourdomichalis, George Dalacouras and son Michalis to name a few.
published: 18 January 2008

SPAC Me Again
Working with Dahlman Rose and Ladenberg Thalman, the company added a number of interesting nuances to the typical SPAC structure. These include the previously mentioned ability to look outside the sector after 15 months as well as the ability to extend the search period to 36 months with the approval of the shareholders if a letter of intent has been entered into within the initial 24 month period.
Finally, FCN will use a related company to provide technical management and has decided that at least initially the company will retain earnings rather than pay dividends.
To provide a perspective on the various SPACS, we have included a comparative chart showing sponsors, ownership interests and equity contributions.
We look forward to seeing the results of their search. Given the free fall in shipping share prices lately, they may just want to peruse the stock tables.

Excel's Quintana buy collapses as board "dithers"
---The $1.52bn bid by US-listed Gabriel 'Villy' Panayiotides-led Excel Maritime to purchase bulk ship owner Quintana Maritime, has failed. Sources close to the deal indicate to Newsfront the deal foundered as Quintana's board dithered in the wake of the decline of dry bulk share prices.
January 11, Excel was reported to "have paid $27 a share for around 56m shares" valuing the deal at just over $1.51bn in a declining market. Panayiotides was understood to have expected a quick confirmation that weeks of negotiations had arrived at a successful conclusion. The deal would have been the first merger and acquisition between Greek companies trading on the US stock market.
However, with the staff of both companies waiting for news regarding their futures, nothing was forthcoming, which, according to people in both companies, caused great unease. It is not clear how the deal was structured in terms of how payment was to be divided between cash and shares. Details about management changes linked to the takeover also were unknown.
Newsfront understands the Restis group, led by Victor Restis, was supporting Excel, which was said to have beaten-off New York-listed Diana Shipping, controlled by Simeon Palios, and India's Essar Shipping.
Excel, which controls a fleet of 18 bulkers, believes the price on the table was very fair, though lower than what was originally touted. Analysts say the price indicated a top heavy cash deal. "It appears the Quintana board was just too greedy," said one Piraeus-based source. Quintana controls a mixed-size fleet of 29 modern bulkers and newbuilding contracts, and Panayiotides, very much a hands-on owner, had been a leading bidder for the Glyfada, Athens-based Quintana since early December, soon after it was reported to be up for sale.
Acquisition of Quintana would have make Panayiotides a powerful force in bulk shipping. He controls US-listed 'blank cheque' company Oceanaut Inc and interests he controls own around 52.22% of Copenhagen-listed D/S Torm, an operator of bulk carriers, tankers and offshore vessels.
Restis is a 30% investor in Oceanaut. As the bidding process progressed, Panayiotides was a frequent visitor to Copenhagen as he kept Torm informed of developments.
Panayiotides recently relocated his Greek operation, including owning/management company Maryville Maritime Inc, from Piraeus' Akti Miaouli to Nea Kifissia, north Athens.
News a 'deal was on' saw Quintana's share price reach $26.19 a share, just under the bid price, though still below its recent average. However, with no comment on progress of the deal, the share began a dramatic slide.
Source:, 18 January 2008 Vol. 9 / No. 2

The Long Case for Aegean Marine Petroleum
---posted on: January 14, 2008 | about stocks: ANW
Our long stock pick for this 2nd week of January, is Aegean Marine Petroleum Network (ANW).
Aegean Marine Petroleum Network, Inc. is a marine fuel logistics company that physically supplies and markets refined marine fuel and lubricants to ships in port and at sea. As a physical supplier, the Company purchases marine fuel from refineries, oil producers and other sources, and resells and delivers these fuels using its bunkering tankers to a base of end users.
As of December 31, 2006, the Company owned a fleet of 10 double hull and two single hull bunkering tankers with an average carrying capacity of approximately 5,940 dead weight tons. As of December 31, 2006, it also owned a single hull Aframax tanker with a cargo-carrying capacity of approximately 92,000 dead weight tons and one double hull Panamax product tanker with a cargo-carrying capacity of approximately 68,000 dead weight tons. In October 2007, the Company acquired Bunkers at Sea, a marketer and physical supplier of marine fuel. In November 2007, it acquired Portland Bunkers International's marine fuel terminal.
The Company sells and delivers these fuels to a diverse group of ocean-going and coastal ship operators and marine fuel traders, brokers and other users through its service centers in Greece, Gibraltar, Singapore, Jamaica, the United Arab Emirates and Belgium, and plans to commence physical supply operations in the United Kingdom and Ghana during the first quarter of 2008.
We like the shipping sector a lot right now. One of our top and best performing holdings is TBSI, an international cargo shipper. Aegean fits right into this same shipping sector growth theme by supplying essential fuel, supplies, and services to ocean going vessels.
Aegean has some new news that promises to grow its business in the near and long term. Aegean has just taken delivery of a New Bunkering Tanker.
Aegean Marine Petroleum January 8th announced that it has further expanded its marine fuel logistics infrastructure with the delivery of the Amorgos, a 4,600 dwt newly built double-hull bunkering tanker from Fujian Southeast Shipyard in China.
E. Nikolas Tavlarios, President, commented,
With the delivery of our fourth bunkering tanker newbuilding since our IPO, management continues to execute its well-capitalized growth plan. By further expanding our marine fuel logistics infrastructure, we have once again strengthened our position to take advantage of the growing demand for a full-service marine fuel solution from procurement to delivery...
We remain intensely focused on pursuing growth opportunities that meet our strict return criteria exclusively within the global marine fuel logistics industry as we have in the past. The launch of our new service center in Northern Europe combined with our new service centers in the United Kingdom and West Africa, which are scheduled to commence operations in the current quarter, bodes well for Aegean to further increase sales volumes as we continue to enhance our leading industry reputation.
With the delivery of the Amorgos, the Company has deployed the Aegean Tulip, a 1993-built 4,853 dwt double-hull bunkering tanker to West Africa from Gibraltar.
Click here to review the trading software we used in determining our trade position.
Disclosure: Author is long ANW.

DryShips to defer stock split after share price fall
---Greek dry-bulk carrier DryShips Inc has said it will defer its proposed 3-for-1 stock split until a more favorable time, citing the recent fall in share price.
Shares of major dry-bulk carriers have been in free fall since the beginning of this year due to lack of fresh cargo supply in key global export centers and an expected seasonal slowdown in the first quarter. DryShips stock has fallen about 32 percent so far this year. Shares of other major dry-bulk carriers Diana Shipping Inc, Navios Maritime Holdings Inc and Genco Shipping & Trading Ltd have fallen an average 30 percent so far this year.

Oceanfreight Inc. Announces the Appointment of Chief Operating Officer
---January 14, 2008 - Athens, Greece - OceanFreight Inc., (NASDAQ:OCNF) a global provider of seaborne transportation services announced today that Michael Gregos was appointed as the Company's Chief Operating Officer. The search for a Chief Financial Officer is still ongoing.
Prior to joining OceanFreight in September 2007, Michael Gregos was Project Manager for Dynacom Tankers Management Ltd. which he joined in 2001. Prior to that period, he worked for a shipping concern based in Athens and New York for five years and the Corporate Finance arm of a Greek bank for one year. He is a graduate from Queen Mary University in London and holds an MSc in Shipping, Trade and Finance from City University.
About OceanFreight Inc.
OceanFreight Inc. is a global provider of seaborne transportation services through the ownership and operation of vessels in various shipping sectors. The Company owns a fleet of 10 vessels, consisting of 1 Capesize bulk carrier, 8 Panamax bulk carriers, and 1 Aframax tanker with a total carrying capacity of approximately 830,000 deadweight tons.
The Company's shares are listed on the NASDAQ Global Select Market and trade under the symbol "OCNF."
Visit our website at

Stephenson Harwood boosts shipping & trading practices with partner hire
---15 January 2007
Paolo Ghirardani, Head of Shipping Litigation at Stephenson Harwood, commented: "Haris has a blue chip practice and his appointment strengthens our shipping and commodities team and continues our drive to position the firm at the top of the sector. In addition, Haris' exposure to the Greek shipping market will further enhance our practice acting for Greek interests both in London and Piraeus as we look to capitalise on his contacts as well as further enhance our relationships in the region."
Haris joins Stephenson Harwood's Shipping Litigation Group which has ten partners and over fifty lawyers worldwide. The firm offers a fully comprehensive, specialist advice in the areas of litigation (wet and dry); marine insurance, offshore, shipping litigation and ship finance and has coverage across the globe with offices in London, Piraeus, Singapore and China.
Haris' reported cases include Trafigura v. Kookmin Bank, a seminal case on negative declarations and anti-suit injunctions, arbitration reported as LMLN 22/2007, on jurisdiction issues in a shipyard dispute, the Sabrewing, regarding documentary requirements in the presentation of demurrage claims under tanker charterparties, and, the Johnny K regarding the question of damages in addition to demurrage and the Northgate , regarding validity of NORs and estoppel.

Sowing a seed of doubt
If he is right, expect to see wages and costs rise as skills become scarce and inspections find more faults.
Source: Lookout, Fairplay International Shipping Weekly, 17 Jan 2008

Drybulk Fundamentals Remain Healthy
---posted on: January 14, 2008 | about stocks: DRYS / GDOCF.PK
The recent slide in stock prices have left many investors worried about the real strength in the drivers behind the latest year's surge in drybulk rates. In the following article we will look behind the daily stock movements, trying to explain the long-term fundamentals of the drybulk business.
Of the total seaborne trade, drybulk sums up to 36% (2,800 million tons), making it the second largest after the liquid bulk cargoes (38%). The major drybulks consisting of commodities such as iron ore, steam coal and grain.
The Drybulk Fleet
Capesizes are typically around 175,000 deadweight tons (dwt), although both smaller and larger sizes are commonly refered to as capesize. The term is used to describe a vessel that must sail around the capes, instead of using the canals. In this article a capesize will be known as above 100,000 dwt.
The panamax vessel (60-99,999 dwt) is dimensioned to sail through the Panama Canal. In drybulk terms the panamax vessel's trading pattern makes a canal route seldom. Fully loaded one might even experience the panamax to be too deep-draught for the canal.
Smaller sized vessels are known as supramaxes (40-59,999 dwt) and handysizes (10-39,999 dwt). They are more flexible regarding to cargoes, and may carry both major and minor bulks. The smaller sizes are also less deep-draughted, and may enter more shallow water than the bigger tonnage.
The existing fleet sums up to 390 million dwt. In percent of dwt 34% are capesizes, 28% panamaxes, 19% supramaxes and 19% handysizes.
The Drybulk Orderbook
There are currently around 210m dwt in order, though reports are somewhat conflicting the 200-220m dwt range seems likely. This is an astonishing number, and correspond to 54% of the drybulk fleet. 75% of the dwt in order are capesize and panamax vessels. Let us look closer on when these vessels are expected to be delivered:
This year 55 capesizes (10m dwt) are scheduled for delivery, wich adds on to a total capesize fleet of 760 vessels. In 2009 another 23m dwt (130 capesizes) are expected to be delivered, mainly in the second half of the year. And in 2010 there are currently 50m dwt in order, wich is about 285 capesizes. The rest (33m dwt) are scheduled for 2011 and 2012, making the total orderbook 90% of todays capesize fleet.
On the panamax side there are 44m dwt in order for 2008-2012, wich is about 40% of the current fleet of 1475 vessels. 95 panamax vessels (7m dwt) are expected to be delivered in 2008, and another 11m dwt will take place in 2009. As for the capesize orderbook, 2010 is the year for newbuilds, were 16m dwt of panamax tonnage are due for delivery. In 2011 and 2012 another 10m dwt will be delivered, making the total orderbook about 585 panamax vessels.
Too Big Supply Side?
There have been contracted several newbuilds the last year, and the orderbook stands at historical high levels. However the total fleet is growing older, and this is a key factor when looking at the orderbook.
In short 30% of the drybulk fleet is above 20 years, and 15% above 25 years today. 18% of the current capesize fleet is above 20 years (140 vessels), and in 2010 there will be 105 capesizes above 25 years. 22% of the panamax fleet is above 20 years (325 vessels), and an estimated 245 vessels will be above 25 years in 2010. Major charterers are already cautious about taking tonnage aged 20 years, and one may witness major scrapping if rates come tumbling down. This will be a buffer for the freight market when trouble happens. These older vessels experience much more down time in ports than modern tonnage, and they are increasingly expensive due to surveys.
In 2007, China passed South Korea as the largest shipbuilder in the world. A great deal of the Chinese orders have been placed at so-called virgin yards. Many of these yards have not even been built yet, and some are even struggling to get financed. That is the matter of both the yards and the new building contracts, and it is estimated that 68% of the orders still lack financing. One might see that the credit crunch will cut down on financing, or make this very expensive for some owners.
Subcontractors are already experiencing much pressure, and in 2007 about 15% of the orders were delayed because of this. The key question is whether subcontractors can pick up their production fivefold in two years just time too meet yards expectations. Already today motors and hatch covers are very sought-after parts. The situation is likely to be deteriorating the next couple of years.
Orderbooks have been increasing dramatically not only in the drybulk sector, but for the tanker, container and rig sector as well. This has already resulted in an international crew crisis, were the lack of experienced officers are precarious. For the operators this seems to be the biggest challenge going forward.
The Steel Industry
The steel industry is by far the largest driver of drybulk, demanding both steam coal and iron ore, which sums up to about half of the total drybulk trade. The iron ore demand into China have been growing stronger for every year. From 75mt in 2000 it reached about 380mt in 2007, having beated the forecasts year after year. For 2008 the expectations are 450mt, wich is up 100mt from the 2008 estimates made in 2005. By 2010 the current estimates range between 550 to 600 million tonnes of iron ore into China. Looking at the four largest iron ore producers a production increase of 100% from 2006 to 2010/11 is expected to take place.
Can the historical growth in steel demand really be sustained? The urbanization of China, India and the Middle-East leads to increasing per capita consumption of steel. South Korea and Japan being at 1.3t and 0.9t per urbanised capita respectively. India and China are currently at 0.15t and 0.6t, despite China being the largest steel producer. The Chinese steel production has grown with 15% annually for the last 12 years, with an increased pace for the last five years. From 100mt in 1996 the 2007 steel production reached about 450mt. This is ten times the production witnessed in India, though production is picking up there as well. Even if the pace should increase less than recently, the added volume will still grow at historical levels. The world steel production is expected to grow from todays level of 1,200mt to reach 1,485mt in 2010. Asia accounting for 860mt of this production, and the US at todays level of 135mt. The main steel consumption is also expected to take place in the emerging markets. For 2008 about 60% of the steel demand will come from Asia.
Increasing Coal Demand
Chinese coal-fired power plants have been adding to the upside in drybulk demand growth. The biggest coal plant in China, situated in the Zhejiang Province, needs 12mt of coal per year. China is expected to build 500 coal-fired plants the next 10 years. This will require 400mt of coal per year in addition to todays level. The fact China becoming a net importer early in 2007, much of this increase will have to come from distant sources. However the Chinese are trying to increase their own coal production, but this has to be shipped as well. 75% of the Chinese coastal trade relates to coal transport. This trade is growing fast, and is estimated to need 75m dwt in additional tonnage within 2010. This equals to 100 panamaxes, or about 17% of the global panamax orderbook.
In the recent years coal have become significantly cheaper than oil per kwh. Even when including cost of transport, coal is about 0,4 per kwh versus oil. In Japan one has even witnessed a swap from uranium to coal. Many of these power plants can be fired on several commodities, and one may expect more coal-fired plants to be built in the future.
New Trading Patterns
Much of the recent increase in demand for tonnage is a consequence of a changed trading pattern for some of the key commodities. The main driver has been taxations on Indian iron ore, forcing China to import bigger volumes from Australian and especially from Brazil. The increased distance every tonne has to be transported, has lead to a dramatic increase in tonne-mile demand. Tonne-mile increased an estimated 8% last year, and the trend is expected to continue as more iron ore and coal needs to be shipped from increasingly distant sources.
Australia is still the biggest exporter, accounting for 127mt into China and 109mt to other Asia. Iron ore from Brazil to China is currently 80mt and 53mt for other Asia, and have been increasing dramatically the last years. On the top of this China becoming a net importer of coal, with the surrounding countries coal exports in decline. Australian coal miners are experiencing capacity pressure, and a larger part may come from South Africa or even the US. When these increased sailing distances are added up, the effect on drybulk rates are significant though hard to estimate.
The increased demand for commodities have lead to higher congestion in the ports. Currently there are 150 drybulk vessels waiting outside Australian ports, 60 of these are capesize vessels. In most cases the owners are being paid by the charterers despite of this congestion. The rates have been positive influence by these problems, since a larger part of the fleet is retracted from the market. Though trying for years to expand ports, little has changed. One might wonder what will happen if the orderbook is released into this market, only increasing congestion overall. As long as there is lacking infrastructure to the ports, it does not matter how many more vessels entering the market. They will all end up in a vessel queue waiting.
The Drybulk Stocks
How much is anticipated in the stocks at current levels? The latest slide in the stocks can mainly be attributed to the sharp fall in the freight derivatives market [FFA]. This is the traded forward rates, commonly used for hedging physical positions (e.g. spot vessels). The fall in the FFAs have been up to 25% short term, triggered by port repairs and miners pulling back cargoes. On top of this the annual iron ore price negotiations have lead to increased volatility in the markets. FFAs have mostly been in backwardation the recent years, indicating that rates will come down. This has not been the case, and rather the oppsite has taken place. In June of 2007 the panamax 2008 forward rate was traded around $32,000, today the actual panamax rate being $62,000 on average. Today the panamax 2009 forward rate is traded around $36,000. A further fall in the rates is already priced into the shares, with forwards even lower in 2010 and 2011. It is this highly inaccurate market that in large influence the short term movements in the stock market.
An important fact is the disconnect between actual physical rates and the forward rates. Comparing the time charters (T/C) to the FFA market there is often a 25% discount to actual rates. One might get $60,000 for a two year T/C in the panamax market, but the average panamax forward rate for the same period is only $45,000. How long can the stock market ignore actual earnings?
Much of the slide in stock prices may have to do with the fear of US entering into a recession. When looking at the larger macro picture concerning steel prices, iron ore and coal shipments, one will discover that the US only accounts for 10% of drybulk demand if not less. As a result of the decrease in cargoes short term, the BDI has come off its highs as well. This rate index is purely based on todays situation. One needs to look at each specific commodity, and what is likely to be taking place at the supply and demand side. As we have seen above the picture is still bright, but short term volatility must be expected at todays fleet utilisation.
Many of the drybulk stocks are also trading below their Net Asset Value [NAV]. Though rates have come a bit off lately, the vessel values are still firm and supported by the steel price and T/C rates. A conservative three year time charter rate still gives 18% annual return for a five year old panamax (market price), and 22% for capesizes using the same variables (both unleveraged). If leveraged the return will be even greater. Let us take a look at two different drybulk companies:
DryShips Inc. (DRYS)
DryShips owns five capesizes, 29 panamaxes, two supramaxes and eight newbuilds to be delivered the next two years. The company have a Net Asset Value of $73.3 per stock based on the current market value of the fleet. The newbuilds may rise further in value when closer to delivery.
The CEO and main stockholder, George Economou, is spot oriented with currently 75% of the 2008 capacity in the spot market. The time charters are mainly one year deals to expire at the end of 2008. Today these time charters are 25% above the current spot market rate.
When calculating earnings based on the time charters and 2008 freight derivates for the spot fleet, one might expect an EBITDA of $750m in 2008. Using the current one year T/C rate on the spot fleet, EBITDA amounts to $940m. These estimates equals to $20.7 and $26.0 respectively. DRYS is currently trading around $61.5 per stock, with P/E multiples between 2.4 and 3. Looking at 2009 one has to discount rates further. The 2009 FFAs gives an EBITDA of $505m or $14 per share, but based upon the current two year T/C level one might expect an EBITDA of $760m or $21 per share. This equals to a P/E between 2.9 and 4.4.
Regardless of calculation method, there seems to be an upside in the stock. The currently low multiples reflects the higher risk, regarding DryShips' charter strategy. A trigger for the share could be more revenues locked in for the long-term, or a more aggressive dividend policy. Last week DRYS announced a regular dividend of $0.20 per stock, which arguably is low when considering its free cash flow going forward. However this must been seen in line with the company's outspoken growth strategy.
Golden Ocean Group Ltd. (GDOCF.PK)
Golden Ocean have a different approach to the drybulk market, both in regard to vessel owning, charter strategy and dividends. Currently they own two sailing capesize vessels on long term time charters, and 31 new buildings (11 capesizes and 20 panamaxes) to be delivered the next three years. In addition to this Golden Ocean have about 30 panamaxes chartered in short or long term. 13 of the chartered vessels have a purchase option of about one third of the vessels current market value.
Considering the company's opportunistic market approach, they have already sold 11 of the new building contracts making a profit of $380m. These profits are expected to be recorded on delivery of the vessels, about $220m in 2008 and another $100m in 2009.
Looking at earnings per stock for 2008 and 2009, based up on current time charters and using the FFA market on the spot fleet, one may expect $1.55 in 2008 and $1.0 in 2009. When estimating earnings based solely on the T/C levels, $1.8 and $1.35 per stock would be possible for 2008 and 2009 respectively if revenues were locked in today. In addition one must expect further sale of vessels, combined with leases, and the effects this may have on the earnings figures. Current estimates equals to a P/E between 2.6 and 3.0 for 2008 and 3.4 to 4.6 on 2009 earnings, not estimating further vessel profits.
In November of 2007 the company announced a change in dividend policy, from now on all cash flow would be divested to the stockholders. A quarterly dividend of $0.5 was declared and expectations of similar amounts were made. This was later confirmed in press release statements such as to "increase dividend capacity going forward" have been mentioned several times. The stock is trading at $4.60 currently, making it a true high yield stock expected to pay $2 in 2008. This is in the high end of the stock market, but not unacquainted when looking at the main stockholder's dividend history from Frontline (FRO).
Drybulk is a highly fragmented business world wide. The ten largest owners controlling only just 20% of the world fleet. As witnessed in the tanker industry, one should expect further consolidation in drybulk. I believe these two picks may play a part in this ongoing consolidation.
Disclosure: Long in GDOCF.PK at time of writing (13th January 2008). No investments should be done based on this article, remember to do your own research.

PROGRAM - P&I Conference - 24 January 2008 - Piraeus Marine Club
8th P&I Conference - 24th JANUARY, 2008
10: 00 Registration - Coffee
11:00 Opening Address :
Ms. Maria Prevezanou- Evmar Marine Services Ltd. - Treasurer of the Piraeus Marine Club / Organiser of the Meeting
Introduction by the Chairman of the meeting : Mr. Lou Kollakis - Chartworld Shipping Corp.
12:15 Coffee Break
13:55 Closing remarks by the Chairman- Mr. Lou Kollakis
14:10 Lunch
In view of the great anticipated turnout and limited number of places, we strongly recommend that attendance be confirmed soonest to Ms K. Vienna of the Piraeus Marine Club, Tel.: 210 4293 606, as strict priority will be observed.
Source: Piraeus Marine Club