3SOF

EXM technical & fundamental analysis:



EXM is trading at just 10.4 times 2007 estimated earnings, and I believe there's upside to those estimates, because the company already had net profit margins of around 60% in the past (just 25% in 2006). Basically, they already bought 16 big ships and now they rent them and make a lot of money. The chart is also quite bullish.

The trading plan is:

Buy EXM, 6.66% of capital as always.

David nailed it. I've been an EXM long since $23. It's still terribly cheap, IMHO. So is DRYS.

Buy buy buy!

Ram

A little caution might be in order with earnings due after market close on Tuesday 5/22

NEW YORK, May 14 (newratings.com) - Analysts at Cantor Fitzgerald maintain their "hold" rating on Excel Maritime (ticker: EXM). The target price is set to $22.

In a research note published this morning, the analysts mention that the bulk of Excel Maritime's vessels are trading under long-term and short-term time charter contracts, providing visibility into the company's revenue stream. Given Excel Maritime's older fleet profile, especially in the Handymax segment, the company's stock should not trade in-line with the peer average, the analysts believe.

David,
Why not SFL / GMR which have a significant dividend yield?
Nick

Quote from: nicknite20 on May 16, 2007, 12:56:40 PM
David,
Why not SFL / GMR which have a significant dividend yield?
Nick

Or GNK - pays 7% div

RE: GMR - Morgan Stanley just bought 3.86 million shares for about 112.3 million ~ $29.09/share from Bergesen Worldwide Ltd. 

GMR looks like a good stock for the IRA

Diana Shipping (NYSE: DSX) was started at JP Morgan with an Overweight rating based on valuation and positioning. Lazard started Diana with a Buy rating, expecting demand for dry bulk shipping will outperform supply through 2010. 8.9% div. 83% growth this year.

DRYS looks good 5x 2008 earnings of $8.00

I Love DRYS too :)

Price target was raised a week or so ago to $50/Share as well :)

I am thinking Dave likes EXM more MAYBE because:

Next year's growth rate is a tad better.  I dunno. He is the Expert  ;)
Here is the difference:  (From Yahoo)

Next Year's Growth Rate:
EXM=   7.9%
DRYS = 5.8%


This year's Growth Rate:
EXM =    48.8%
DRYS = 117.2%

Forward PE:
EXM = 9.68
DRYS= 7.22

Shipping group current multiple (P/E): 15.40
So, the stocks should be close to these stock prices: 
EXM  = $38.96
DRYS = $79.6

Things that make you go Hmm!

Yeah, EXM
They have several vessels on long TCs, and thus have moderate upside to 2008.

Quote from: ramlau on May 16, 2007, 09:02:53 AM
David nailed it. I've been an EXM long since $23. It's still terribly cheap, IMHO. So is DRYS.

Buy buy buy!

Ram

Thanks Ram, DRYS also looks cheap here.

Quote from: garyaross on May 16, 2007, 09:50:15 AM
A little caution might be in order with earnings due after market close on Tuesday 5/22

Do you mean I should be cautious because earnings can be below expectations? Or simply because they are coming? Of course, I can't be cautious because the earnings date is coming, since if I were to sell before earnings, or not buy because of earnings releases, I would be doomed to be a short term trader. Fortunately I can hold through earnings and be a long term investor. Thanks for the advice garyaross :)

Quote from: nicknite20 on May 16, 2007, 12:56:40 PM
David,
Why not SFL / GMR which have a significant dividend yield?
Nick

I dislike dividends. Moreover, SFL revenues are shrinking and it is a $2 B plus market cap. GMR is trading at 14 times estimated 2007 EPS and EXM is trading at 10 times, so I prefer EXM.

QuoteOr GNK - pays 7% div

GNK is diluting shareholder's value, since in 2005 it had net income of $54 M and EPS of $2.90 and in 2006 it had net income of $63 M and just $2.51 EPS. They might as well cut that dividend and stop printing shares.

Quote from: yukiii on May 16, 2007, 04:26:24 PM
Diana Shipping (NYSE: DSX) was started at JP Morgan with an Overweight rating based on valuation and positioning. Lazard started Diana with a Buy rating, expecting demand for dry bulk shipping will outperform supply through 2010. 8.9% div. 83% growth this year.

DRYS looks good 5x 2008 earnings of $8.00

DSX is very expensive when compared to EXM, since, for example, its market cap is $1.2 B for 2006 revenue of $116 M, and EXM is a $527 M market cap for 2006 revenue of $124 M. Also, what's that stuff of preferred dividends in DSX? DSX has also been a "heavy diluter" over the past few years.

DRYS looks very interesting ... why do you say $8 EPS for 2008? Analysts are predicting just $5.47, but I would go more with you than the average analyst. What's your reasoning, continuing growth?

QuoteI am thinking Dave likes EXM more MAYBE because:

Next year's growth rate is a tad better.  I dunno. He is the Expert :)

Hi wxmang, I like EXM a lot, but I never said I preferred it to DRYS, in fact, this is the first time I look at DRYS and indeed, at first sight it looks attractive. I hope somebody asks for this analysis at today's Analysis on Demand, so I can check it out in a more in depth manner.

Ok, going back to EXM, this round for competitor's made me even more confident on the success of this trade, since EXM looks to be the most attractive stock of the group (also the smallest market cap, just $527 M, all others are close or north of $1 B).

The technical correction seems overdone, I'll keep holding EXM.

Re: Earnings.  David, since you do such a good job of fundamental analysis on stocks before we get in, it allows the investor a little more security about future imminent earnings.  I guess my point is that on your subscriber list many are not long term traders.  Buying right before earnings is always scarry.  My personal approach is to buy 1/4 or 1/2 position in such cases.

Quote from: garyaross on May 17, 2007, 08:21:52 AM
Re: Earnings.  David, since you do such a good job of fundamental analysis on stocks before we get in, it allows the investor a little more security about future imminent earnings.  I guess my point is that on your subscriber list many are not long term traders.  Buying right before earnings is always scarry.  My personal approach is to buy 1/4 or 1/2 position in such cases.

Thanks for your personal opinion and good luck with your approach garyaross.

I'm not feeling well today, can't read another line ... I'll keep holding EXM.

fyi:nice presentation
http://www.excelmaritime.com/files/bearexcel.pdf

Shippers are going down today, as rates have peaked in May and will be heading down as usual. Follow the rates. sell when they peak.....

Quote from: la-onda on May 18, 2007, 08:00:25 AM
fyi:nice presentation
http://www.excelmaritime.com/files/bearexcel.pdf

Thanks for the informative presentation la-onda :)

Quote from: yukiii on May 18, 2007, 01:54:20 PM
Shippers are going down today, as rates have peaked in May and will be heading down as usual. Follow the rates. sell when they peak.....

Yukiii, thanks for the information, but can you share your source?

The index that economists usually use to measure the average price of ocean transportation of industrial bulk commodities is the Baltic Exchange Dry Index (http://investmenttools.com/futures/bdi_baltic_dry_index.htm), which is up almost 50% in 2007:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=37028;image)

The historical chart above clearly shows that the "sell in May and go away" aphorism doesn't apply to the shipping markets (also not to the stock market). Yes, there was a very small correction lately, but the trend is bullish, shipping rates just made a new all time high recently.

This is clearly an industry I want to be involved with, and the comparison I made between EXM and its industry peers tells me EXM is the most attractive of them all.

The stock may have several corrections along the way, like the one that is happening now, but the long term technical trend is bullish and fundamentals are attractive. I'll continue holding EXM.

All shippers are down this week because of the peak in price. China rate increase will effect them some more this week.
EXM rates are locked till 2008  so not much grow going forward the trade was already made. Sell EXM and but DRYS when it bottoms that the trade. DRYS down 15% sofar last week. If you belive in the rates going up or staying the same but another shipper.........
DRYS TARGET IS $50 EXM IS $28

That was my conclusion too :)
Here is the difference (Before the shipper correction):  (From Yahoo)

Next Year's Growth Rate:
EXM=   7.9%
DRYS = 5.8%


This year's Growth Rate:
EXM =    48.8%
DRYS = 117.2%

Forward PE:
EXM = 9.68
DRYS= 7.22

Shipping group current multiple (P/E): 15.40
So, the stocks should be close to these stock prices: 
EXM  = $38.96
DRYS = $79.6

DRYS just got 15% cheaper versus EXM's 5% loss last week.
IMHO, DRYS seems like an even better deal!

Quote from: wxmang on May 20, 2007, 10:45:04 PM
That was my conclusion too :)
Here is the difference (Before the shipper correction):  (From Yahoo)

Next Year's Growth Rate:
EXM=   7.9%
DRYS = 5.8%


This year's Growth Rate:
EXM =    48.8%
DRYS = 117.2%

Forward PE:
EXM = 9.68
DRYS= 7.22

Shipping group current multiple (P/E): 15.40
So, the stocks should be close to these stock prices: 
EXM  = $38.96
DRYS = $79.6

DRYS just got 15% cheaper versus EXM's 5% loss last week.
IMHO, DRYS seems like an even better deal!

It would be nice to get into DRYS under $35 will see what happens on Monday........

QuoteIt would be nice to get into DRYS under $35 will see what happens on Monday........

Close yukiii, the low of the day was $35.09. Good luck with DRYS :)

But tell me yukiii, one of your arguments for selling EXM was your expectation of shipping rates going down, that is, a macro reason. Yet, you're bullish on another shipping company. Can you explain your reasoning? Thanks.

EXM's 1st quarter earnings will be released after the close, analysts expect $0.64 EPS on $34.98 M revenue, I'll hold EXM through earnings.

Missed by 3 cents...

I dont think this stock is going to go down much may 2-3% from here. I think if anything this earnings report is going to be seen as luke warm reaction.

Quote from: David Randolph on May 22, 2007, 08:36:26 AM

QuoteIt would be nice to get into DRYS under $35 will see what happens on Monday........

Close yukiii, the low of the day was $35.09. Good luck with DRYS :)

But tell me yukiii, one of your arguments for selling EXM was your expectation of shipping rates going down, that is, a macro reason. Yet, you're bullish on another shipping company. Can you explain your reasoning? Thanks.

EXM's 1st quarter earnings will be released after the close, analysts expect $0.64 EPS on $34.98 M revenue, I'll hold EXM through earnings.

I was giving you the reason in general why shipping stocks went down. It was a good chance to buy one ones that will do better going forward, EXM is not the one to buy........ Shipping is very complicated, there is one guy on yahoo that knows this stuff inside out. age of fleet, contracts, shippings rates,

EXM range $22-$28

TBSI seems to be the one on fire for the shippers.

Quote from: nullzero on May 22, 2007, 04:28:06 PM
TBSI seems to be the one on fire for the shippers.

Yeah, looks good should hit $30.00

After Hours action on EXM

17:59    $ 24.61   500
17:59    $ 24.58   1,000
17:25    $ 25   100
17:17    $ 25.36   100
17:17    $ 25.38   800
17:17    $ 25.29   100
17:06    $ 24.85   200
16:38    $ 25.25   100
16:36    $ 24.85   100
16:34    $ 24.75   100
16:34    $ 24.80   100
16:28    $ 24.50   100
16:28    $ 24.80   100
16:27    $ 25.10   300
16:19    $ 25.23   100
16:14    $ 25.8603   1,000
16:14    $ 25.8603   600
16:13    $ 25.8424   200
16:13    $ 25.8603   100
16:13    $ 25.8603   500
16:09    $ 25.46   500
16:09    $ 25.46   100
16:09    $ 25.46   100
16:09    $ 25.46   100
16:09    $ 25.46   100

EXM's results were released yesterday after the close:

• Excel Maritime Reports Results for the First Quarter 2007 and Initiates Quarterly Dividend Payout Policy (http://biz.yahoo.com/iw/070522/0256360.html)
Market Wire (Tue 4:05pm)

Everybody knows I dislike dividends, but this quarterly dividend policy tells me management is very confident in being profitable for years to come. $0.20 a quarter is $0.8 for a full year, which at $25.45 means a 3.14% dividend yield. Not bad.

But I'm more interested in reviewing my valuation model estimates:

1) Dilution factor

I had 1.02, but the share count rose just 0.09% from the year ago levels, which is basically zero. I'm going to increase the initial share count slightly to 19,959,257 and reduce the dilution factor to 1.

2) Revenue CAGR

I had 1.1, which means 10% revenue growth. Revenue growth in Q1 2007 when compared to Q1 2006 was 22.1%. However, I don't feel confident enough to raise my revenue CAGR estimate, because analysts are expecting just 4.5% revenue growth in 2008 (http://finance.yahoo.com/q/ae?s=EXM).

3) Net profit margin estimate

I had 50% here, but now I see that's too much. After further investigation I see that the years where net profit margin was higher than 50% were impacted by special items. For example, in 2005, there were $21 M in "other income, net". Without this the net profit margin in that years would have been 39%.

Net profit margin in Q1 2007 was 33.89%. I believe this is a more fair estimate.

4) EPS multiple estimate

Here I'll put the Shipping industry average, which currently is 15.76 (http://finance.yahoo.com/q/co?s=EXM).

Computing the valuation model I get the following:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=37154;image)

It still says the stock is attractive, with an expected 20% share price CAGR, but less than what it was previously. The optimal selling price is now $28.32.

The stock will probably react negatively to earnings today (as it has been the case with most stocks lately, which tells me the current bull market has a lot to go), but it would obviously be cheap underneath the current levels. I'm prepared for some pain, but I expect to take a small profit in EXM if given some time.

I'll continue holding EXM.

EXM's dividend yield just rose from 3.1% to 3.4%, how good is that? :P

Dividend's are a big pain in the ass if you ask me. I was expecting yesterday's fall, but I failed to cut the loss quickly. That's because I agree with yukiii, I see EXM between $22 and $28, therefore I expect to take profits when the stock goes up to do a double top just above $28. But, wouldn't have been better to just take the loss at the open and move on, given the uncertainty of the long term outlook, and the more or less certainty about the market's negative response to earnings?

It's an open debate.

At least for now I'll stick with my long term approach, based on my valuation model that says the optimal selling price for EXM is $28.32 (http://www.3stocksonfire.org/fundamental.model.php?ticker=EXM&portfolio=main), so I'll keep on holding EXM.

Probably I should have sold EXM right then when I reduced my long term estimates. But now I see it going to the "too cheap" territory, so I'll hold. I expect the stock to maybe touch the 50 days SMA and then make a second bull run to a top around $29. I'll take a small profit then. Not a trade I'll be proud of, I hope it doesn't damage the portfolio's return even more. It wouldn't make sense to go down much more, since EXM is now trading at 8 times 2007 estimated EPS (http://finance.yahoo.com/q/ae?s=EXM) and the industry average is 15.16 (http://finance.yahoo.com/q/co?s=EXM).

The Shipping industry average earnings multiple declined to 14.45 (http://www.3stocksonfire.org/3stocksonfire.php), so I've adjusted my EPS multiple estimate for EXM. This way the model says the optimal selling price is $25.96 (http://www.3stocksonfire.org/fundamental.model.php?ticker=EXM&portfolio=main).

I'll sell EXM around that level if I have the chance.

The shipping industry average earnings multiple declined to 13.38 (http://finance.yahoo.com/q/co?s=EXM) and with this change my valuation model says I should sell EXM at $24.02 (http://www.3stocksonfire.org/fundamental.model.php?ticker=EXM&portfolio=main). The stock closed at $23.96 yesterday, so this is pretty much a sell at the open indication.

Not a trade that I'll be proud of. The trading plan for EXM is SELL.

I held instead... ;D

I sold today...Thank you very much.... ;D

EXM has been trading between the $24.5 support and the 50 days SMA:

Fundamental Case:

EXM's takeover of QMAR was finally closed, after a lot of uncertainty due to the credit crisis. The market loved the news and QMAR is now the largest shipping company trading in the US exchanges:

What EXM Receives From Transaction: With the acquisition of QMAR, EXM becomes the
largest US-listed, dry-bulk shipping company by dead-weight tonnage (DWT) as it increased its
current carrying capacity from roughly 1.0 billion DWT (18 vessels) to over 3.7 billion DWT (47
vessels).
(I now have this tendency of going for the leader, the biggest - after seeing that they held much better in the market downturn, despite, most of the times, being more "overvalued". I have to be able to change my beliefs to keep learning and improving)

Here's a full analysis from, for example, Dahlman Rose & Co.:

Excel Maritime
Quintana Shareholders Approve Merger;
New Asset Mix Transforms Company

►Quintana Maritime shareholders approved the proposed merger with Excel Maritime yesterday. Each QMAR share is set to receive $13 in cash and 0.4084 EXM shares, although the final stock portion will be adjusted for QMAR's 0.31/share dividend paid this past March. The deal is expected to close today.

►Excel also announced that its $1.0 billion term loan and $400 million revolving credit facility, lead arranged by Nordea, have been successfully syndicated. Over 60% of the financing package has been committed by the arrangers, which was the minimum requirement for the deal to be approved. The loan bears interest at LIBOR plus 1.25%. We believe Quintana's young asset mix with long term contracts in place was instrumental in securing this new financing package.

►This transaction is transformative for Excel, as its fleet is set to grow from 18 vessels to 48 plus Quintana's joint venture interests in 7 Capesizes under construction. The average age of its fleet is also dramatically reduced, from over 13 years on average down to just 6 years. Visibility is also greatly enhanced as 72% and 53% of its 2008 and 2009 operating days are under contract respectively compared to 57% and 18% prior to the deal. We believe the extended visibility and younger fleet will allow Excel to garner a higher premium than it received prior to Quintana.

►Although the acquisition is dilutive near-term as Excel shares were valued at 3xEBITDA compared to Quintana's take-out valuation of 8x, 2010+ CFs are set to increase significantly. We now project Excel to generate $8.17/share, 6.85/share, $6.99/share and $9.04/share from 2008 to 2011 compared to our prior forecasts of $8.81/share, $8.17/share, $6.80/share and $6.99/share.
(I find it interesting that people inside the industry are willing to pay 8xEBITDA and the market just values at 3xEBITDA)

►We believe Excel shares are attractive as we assess the company's new net asset value at $38/share—nearly 34% higher than its current share price. Excel will be levered at just 45% post-transaction which should give the Board flexibility in boosting its dividend payout. Excel's $0.80/share annual payout represents just 10% of our CF estimates during the next two years. As such we believe there is considerable room for the dividend to grow and for further vessel acquisitions. On a CF basis, Excel shares are yielding a quite high 28.5% and 23.9% respectively for 2008 and 2009.

►Overall, we find the addition of Quintana's modern fleet of Capesizes and Panamaxes and key members of its management team highly favorable. Quintana CEO Stamatis Molaris, who has a strong presence with US investors, is set to takeover the CEO role for Excel. We reiterate our Buy rating and $50 target, which we arrive at by targeting 7x2009 CF.

Technical Case:

EXM closed above the 50 days SMA for the first time in 6 months, and did it with a bang, up 20% on volume of 3.8 million shares:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44891;image)

There's some minor resistance at $39, but I think this bullish move will take shares to the $50 zone, since that is the midpoint of most analysts calls (some of them have price targets in the $70 area).

Risk is that EXM falls back down below the 50 days SMA, currently at $31.27. That would be my stop. So I see about 43% profit potential and about 11% loss potential. I'll take it.

EXM trading plan:

Buy EXM at the open. Take profits at $50. Sell with a small loss if the stock is set to close below $31.27.

EXM opened with a gap up and some people took profits, but they weren't strong enough to fill the gap at $35.45. Volume remained exceptionally high.

I say that if EXM is able to close above $39 it clears the way for a move towards $50. I think that's what will ultimately happen.

EXM trading plan:

Take profits at $50. Sell with a small loss if the stock is set to close below $31.40.

QuoteI say that if EXM is able to close above $39 it clears the way for a move towards $50. I think that's what will ultimately happen.

EXM made it, it closed above the $39 resistance level. Volume remained exceptionally high. I guess this is because EXM is now the largest US listed dry bulk shipping company (by capacity, not market cap).

The way is clear for a move towards $50 ...

EXM trading plan:

Take profits at $50. Sell with a small loss if the stock is set to close below $31.57.

EXM trading plan:

Take profits at $50. Sell with a small loss if the stock is set to close below $31.75.

I'm going to raise the bar a bit on EXM and make sure (well, that's impossible, because the stock can always gap down) that I lock in at least a small profit.

EXM trading plan:

Take profits at $50. Sell with a small profit if the stock is set to close below $39.

EXM trading plan:

Take profits at $50. Sell with a small profit if the stock is set to close below $39.

EXM is still trading at a discount versus its peers ...

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=45185;image)

... and analysts really love the merger with QMAR now that it was consummated.

I see $50 as almost a sure thing and wonder if I shouldn't let the profits run some more on EXM.

For now the trading plan remains:

Take profits at $50. Sell with a small profit if the stock is set to close below $39.

For now the trading plan remains:

Take profits at $50. Sell with a small profit if the stock is set to close below $39.

Hmm, I see now that EXM was downgraded from buy to hold by Canton Fitzgerald, on Monday, essentially because it reached the firm's price target of $43 (see complete research attached below). 

However, there are several other firms with much higher price targets, like for example, Jefferies & Co, with a $67 price target (see complete research attached below).

So I figure people used Cantor's downgrade as an excuse to take profits down to the $39 support level. I expect EXM to hold that level, but if it doesn't ...

Trading plan:

Take profits at $50. Sell with a small profit if the stock is set to close below $39.

Trading plan:

Take profits at $50. Sell with a small profit if the stock is set to close below $39.

EXM did what it had to do, that is, trigger the stops below the $39 support level. But in the end it closed above $40, so the stock respected the support. This type of behavior is the reason why I use "stops on close" and not in an intraday basis: one risks a bit more, but also avoids being thrown out of board by short term, intraday noise.

I'm quite confident EXM will have a strong upside day tomorrow ...

Trading plan:

Take profits at $50. Sell with a small profit if the stock is set to close below $39.

QuoteI'm quite confident EXM will have a strong upside day tomorrow ...

Up 7.6%, I think it qualifies as a "strong upside day".

Trading plan:

Take profits at $50. Sell with a small profit if the stock is set to close below $39.

Unfortunately I feel EXM is not going to make it towards $50. The general market (measured by the SPY) is failing at a crucial technical level (the medium term descending trendline), despite better than expected news on the economy.

I want to sell something short here in the TM to provide some equilibrium (I don't like being 100% long in this trading portfolio while the SPY is at resistance levels). To do that I need to free some cash and as I look to the 5 holdings, EXM seems to be the most economically sensitive. The other holdings have a stronger "inflation story" component.

Trading Plan:

SELL EXM.

EXM - Coming off short term Bottom... ;)

Excel Maritime Carriers, Ltd., a shipping company, engages in the ownership and operation of bulk carrier vessels.

52wk Range: 22.25 - 81.99
Volume: 3,552,106
Avg Vol (3m): 1,790,650
Market Cap: 866.58M
P/E (ttm): 7.81
EPS (ttm): 5.57
Div & Yield: 0.80 (2.10%)

Technicals
Most Actives
Percentage Gainer
Price Gainer

Last Price Quote is:
-2.14%below 13-day MA
-1.07%below 50-day MA
RS Rating: 94 

Fundamentals
Key Data:
Market Cap (M): $1,625.21 
P/E Ratio: 6.77 
PEG Ratio: N/A 
Next Earnings: 08/18/2008
Last Analyst Rating: Hold