Tuesday, September 23, 2014

Globus Martime H1 2014 Resuls

Globus Martime, a Greek microcap shipping company, reported a loss for H1 due to impairment charges. Without the impairment charges, the company would have profited $0.13 per share. Revenue was roughly flat versus a year ago.

The company has shifted five of its seven ships to the spot market. Apparently, this is a strategic move to take advantage of the expected recovery in charter rates. The CEO George Karageorgiou said in the report that by next year, when rates are higher, the company will move the ships to longer term charters. The CEO appears to have a much more positive tone compared to last several years. He even said he intends to grow the fleet in the next few years.

The company reported a $1.7M impairment charge for H1.  This impairment has been fluctuating recently because one of the company's ships is held for sale. And its value changes every quarter due to mark-to-market accounting. The impairment has even been negative in the past.

An investor in Globus Maritime must weight two issues. One is the charter rates, which one can gauge using the benchmark like the Baltic Dry Index (BDI). And the other is the company's debt. BDI right now is above the average of the last few years; see here. But it is still depressed, though the CEO is optimistic. The debt issue looms quite large. The company has $85M in debt and $60M of equity. The company's adjusted EBITDA is 5.5 times the interest expense. However, EBITDA doesn't include depreciation. With depreciation, then the interest coverage is an unacceptable number.

In other news, IEHC's CEO wrote a shareholder letter along with the 2014 annual proxy. In the letter, he summarized the published 2014 results. But more importantly, he stated that, at this point in Q2 FY2015, the company's order backlog is $8M. This is the highest level ever and a $2.1M increase since FY2014 end. The company is buying equipment to increase capacity to meet this demand. The stock jumped 12% to $5.10 per share on the news.

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