Star Bulk Strengthens Position With Share Buyback: Analyst Highlights Healthy Dry Bulk Market Outlook

Jefferies analyst Omar Nokta reiterated a Buy rating on the shares of Star Bulk Carriers Corp SBLK with a price target of $22.

The company said that it entered into a Repurchase Agreement with OCM XL Holdings, LP (Oaktree Shareholders), through which Star Bulk agreed to purchase 10 million of its shares from the seller at $18.50 per share.

Oaktree's long-term holding will fall from 25.2% to 17.2% following the deal, and the firm will see its Board representation reduced from three seats to two seats.

The company is funding the deal primarily with proceeds from prior ship sales, as it had previously agreed to sell six older ships for ~$110 million, the analyst added.

The analyst sees meaningful accretion on a per-share basis following the buyback and raised 4Q23 EPS estimate from $0.70 to $0.74 and 2024 EPS estimate from $3.28 to $3.60.

While its leverage ratio will increase following the buyback, Star Bulk remains in strong financial shape, opined the analyst.

Its net debt / fleet value stood at 23.5% pre-deal but the analyst said that will rise to 30% following the transaction.

Given the wide variance between newbuilding prices and secondhand values, the analyst expects a significant tightening of the spread in a recovery.

Given the very low orderbook, a much healthier dry bulk market is not far away, added the analyst.

The analyst concluded that the deal is accretive on both EPS and NAV and highlights Star Bulk's very strong balance sheet and overall financial flexibility.

Price Action: SBLK shares are trading higher by 4.13% at $18.40 on the last check Friday.