Dryships' Increasingly Valuable Fleet of Vessels

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

19 Mar 2008

There is another reason to buy Dryships, the largest publicly traded drybulk shipper, besides its extremely low PE relative to its industry and market and its high net income relative to expenses: it has a large fleet of vessels that is becoming more valuable each day.A lot has happened to make its vessels more valuable. First, there has been tremendous demand for commodities, so that Dryships and other shippers have no trouble chartering their vessels at attractive rates. This has created a huge frenzy to buy ships to meet this demand. Ship builders cannot make them fast enough; lots of ships are on order, but new builds are out 2 or 3 years. Some of the ship yards where these boats are on order are green fields (they themselves have not even been built)! The demand is so great that you can buy older ships for prices higher than new ones (because they will not be ready for a few years and the shippers want the boats right away). Moreover, the price of iron and steel has been climbing, adding to the value of their boats. Dryships has also been upgrading its fleet buying newer vessels and jettisoning the older less profitable ones.Dryships recently sold one of its older (1996) Panamax vessels (weighing 73000 dwt) for 65 million dollars, or about $890 per dwt. They replaced it with a more modern 2000 Panamax of similar weight for 72 million dollars, or about $986 per dwt. A year ago, they bought similar (2001) Panamax vessels for 49 million dollars, or $662 per dwt. This is typical of the industry: the value of theybulk fleet is increasing dramatically.I've looked across the spectra of drybulk ships: Capes, Panamax, Supramax, Handymax. Currently their prices are all higher over the year. In general, all the vessels trade at about the same dollar price per dwt. A year ago they averaged $640-720 per dwt; they now go for $880 - 1000 per dwt. Dryships has a modern and large fleet of 38 vessels comprising a whopping 3,226,000 dwt fleet. At a rate of about $910, the fleet is worth 2.9 billion dollars. It has over 100 million in cash, 1 billion in debt, the likely proceeds of 360 million in its secondary, and a 30% holding in Ocean Rig, plus a thriving business hauling commodities that made 475 million in earnings last year.Today's market cap: 2 billion.