Tuesday, 25 November 2014

DRYS - the terribly troubled shipper

Whilst the broader equity market has more than tripled since 2009, Dry Ships (DRYS) - along with the rest of the shipping companies, have remained weak. Today, DRYS settled -3.3% @ $1.45. The broader outlook remains 'subdued' whilst the BDI remains so very low.

DRYS, daily

DRYS, weekly

DRYS, monthly


*DRYS remains an old favourite of mine to keep an eye on, not least having watched it implode from over $100 in summer 2008.. to the lowly $1s.

First, see key stats.. @ yahoo finance

A key problem for DRYS is the near $6bn of debt. With market cap of just over 0.6bn.. that makes for a debt to market cap' of 1000%.... truly lousy.

The BDI - flat lining since 2011.

BDI, monthly

The BDI (Baltic Dry Index) really explains why most shippers are still suffering. Freight rates are still stuck at very low levels. Whether you want to attribute that to over supply, efficiency gains (larger ships), or just a weak global economy, doesn't really matter.

What does matter is that with the BDI still in the 1000s... most shipping companies are struggling just to stay (no pun intended) financially afloat.

Will DRYS survive?

Considering we're in an economic growth phase, DRYS is performing badly. What happens when the next recession hits?

My guess? Maybe some kind of reverse merger with another of the shippers, NAT or DSX. The problem remains the debt, and even if DRYS can turn profitable in 2015, it'll remain in persistent trouble because of the interest payments ($332 million in 2013).

I sincerely hope DRYS won't disappear next year, it'd be the end of an era.

*a reverse split in DRYS stock seems very likely next year, not least if the price falls under $1.

*I hold no position in DRYS, and have no intention, unless I see some real inflation start to appear in the economy.. along with the BDI >2500.