Deutsche Bank expanded its coverage of the maritime shipping sector to include Star Bulk Carriers (NASDAQ:SBLK)and Genco Shipping & Trading Limited (NYSE:GNK), both of which have been given Buy ratings.
The bank cites solid fundamentals and attractive valuations as reasons for these additions.
For Star Bulk Carriers (SBLK), Deutsche Bank assigned a 12-month price target of $26 per share, representing a 22% upside potential.
"Star Bulk has one of the strongest balance sheets of any public shipping company and its dividend policy is a sector-leading example of prudent
capital management which rewards shareholders across the cycle in the form of quarterly cash dividends or via sustainable and accretive fleet growth," said Deutsche Bank.
SBLK recently merged with Eagle Bulk, making it the largest U.S. publicly listed dry bulk company by fleet size, with 161 assets. Deutsche Bank believes Star Bulk will continue to be a key player in the M&A market and is attractively valued, currently trading at about 80% of the 12-month price target.
For Genco Shipping & Trading (GNK), Deutsche Bank set a 12-month price target of $22 per share, indicating a 25% upside potential.
"The company has one of the strongest balance sheets in the industry, with an estimated net-loan-to-value of ~5%. It ended the most recent quarter with $42.3 MM in cash on the balance sheet and has access to liquidity of another ~$330 MM under its revolving credit facility," said Deutsche Bank.
Analysts added that the company has successfully reduced its debt by 78% since implementing a new strategy in 2021 and continues to pay down debt.
Deutsche Bank explains that Genco also operates a shareholder-friendly dividend policy, distributing excess cash to investors. The firm is expected to continue modernizing its fleet through secondhand acquisitions while monetizing older assets.
Despite some uncertainty surrounding dry bulk demand, especially due to concerns about the Chinese economy and the ongoing Red Sea situation, Deutsche Bank views these two companies as well-positioned for the future, with strong capital structures and potential for M&A activity.