Stock Alert for DryShips Inc. (DRYS)
DryShips Inc. (NASDAQ: DRYS)
DryShips Inc. (DRYS) owns, through its subsidiaries, a fleet of 40 drybulk carriers comprised of seven Capesize, 29 Panamax, two Supramax, and two newbuilding drybulk vessels, as well as two ultra-deep-water semi-submersible drilling rigs and two ultra-deep-water newbuilding drillships. The Company’s drybulk fleet carries a variety of drybulk commodities including coal, iron ore, and grains, bauxite, phosphate, fertilizers and steel products. DRYS employs its drybulk vessels under period time charters, on bareboat charters, in the spot charter market and in drybulk carrier pools. Its subsidiaries include Ocean Rig ASA, DrillShips Investment Inc. and Primelead Shareholders Inc.
The Company was founded in 2004 and is based in Athens, Greece.
| Share Statistics (8-Jun-10) | FY
2007 |
FY
2008 |
%
Chg |
Q4 2008 | Q4 2009 | %
Chg |
||
| Symbol | DRYS | Revenue, $Mn | 582.6M | 1.08B | 85.4% | 217.9M | 193.5M | 11.2% |
| Current price | $4.06 | Gross marg. | 93.3% | 86.2% | 7.6% | n/a | 72.7% | n/a |
| 52wk Range: | $7.99-4.16 | Oper. margin | 90.6% | -20.5% | 122.6% | n/a | 16.3% | n/a |
| Avg Vol (3m): | 17,308,000 | Net margin | 82.1% | -33.3% | 140.8% | n/a | 0.7% | n/a |
| Market Cap. | 1.15B | |||||||
| Dil. Shares Outst. | 294.8M | EPS, $ | 13.32 | -8.10 | 160.8% | -18.42 | -0.08 | 99.6% |
Source: Reuters.com, SEC Filings.
Financial Summary
For the first quarter of 2010, the Company reported net income of $5.7 million, or $0.01 basic and diluted earnings per share. Included in the first-quarter 2010 results are various items, totaling $61.9 million, or $0.26 per share, which are described below. Excluding these items, net income amounted to $67.6 million, or $0.27 per share.
- Included in the first-quarter 2010 results are net gains of approximately $10.7 million, or $0.04 per share, from the sales of the vessels Iguana and Delray.
- Included in the first-quarter 2010 results is the net effect of deferring revenues and direct incremental expenses to future periods, which negatively impacted results by approximately $16.6 million of net revenues, or $0.07 per share, relating to the mobilization of the Leiv Eiriksson, and which have been deferred to future periods. In October 2009, the Leiv Eiriksson commenced mobilization for a three-year contract with Petroleo Brasileiro S.A., or Petrobras, for exploration drilling in the Black Sea. Prior to the Petrobras contract, the rig operated for Shell in the North Sea. Accordingly, all revenue and direct incremental expenditure during the mobilization of this unit from the North Sea to the Black Sea will be amortized over the life of the Petrobras contract, commencing from February 24, 2010, the date the rig commenced drilling operations in the Black Sea.
- Included in the first-quarter 2010 results are non-cash amortization of debt issuance costs, including those relating to the Company’s convertible senior notes issued on November 19, 2009, totaling $6.9 million, or $0.03 per share.
- Included in the first-quarter 2010 results are losses incurred on the Company’s interest rate swaps, amounting to $34.6 million, or $0.14 per share.
- Included in the first-quarter 2010 results is amortization of stock based compensation of $14.5 million, or $0.06 per share.
Basic earnings per share for the first quarter of 2010 includes a non-cash accrual for the cumulative payment-in-kind dividends on the Series A Convertible Preferred Stock, amounting to $4.0 million, which reduces the income available to common shareholders. Basic earnings per share is calculated as net income less accrued dividends on preferred stock divided by weighted average number of common shares outstanding.
Financial Review: 2010 First Quarter
The Company recorded net income of $5.7 million, or $0.01 basic and diluted earnings per share, for the three-month period ended March 31, 2010, as compared to a net loss of $118.9 million, or $1.09 basic and diluted loss per share, for the three-month period ended March 31, 2009. EBITDA, which is defined and reconciled later in this press release, was $81.9 million for the first quarter of 2010 as compared to negative $41.0 million for the same period in 2009.
Included in the first-quarter 2010 results are various items totaling $61.9 million, or $0.26 per share, which are described at the beginning of this press release. Excluding these items, adjusted net income amounts to $67.6 million, or $0.27 per share.
Basic earnings per share, as defined earlier in this press release, for the first quarter of 2010 includes a non-cash accrual for the cumulative payment-in-kind dividends on the Series A Convertible Preferred Stock, amounting to $4.0 million, which reduces the income available to common shareholders.
For the drybulk carrier segment, net voyage revenues (voyage revenues minus voyage expenses) increased by $18.0 million to $106.9 million for the three-month period ended March 31, 2010, as compared to $88.9 million for the three-month period ended March 31, 2009. For the offshore drilling segment, revenues from drilling contracts amounted to $80.3 million for the three-month period ended March 31, 2010, as compared to $96.0 million for the same period in 2009. This decrease is mainly due to the deferral of revenue during the first quarter of 2010 as a result of the mobilization of the Leiv Eiriksson from the North Sea to the Black Sea.
Total vessel and rig operating expenses and total depreciation and amortization decreased to $48.4 million and $47.2 million, respectively, for the three-month period ended March 31, 2010, from $50.5 million and $48.4 million, respectively, for the three-month period ended March 31, 2009. Total general and administrative expenses increased to $27.2 million in the first quarter of 2010 from $21.5 million during the comparative period in 2009.
Interest and finance costs, net of interest income, decreased to $24.5 million for the three-month period ended March 31, 2010, compared to $26.6 million for the three-month period ended March 31, 2009.
Recent Events
$240 million in aggregate principal amount raised through the issuance of senior convertible notes.
The Company has entered into agreements to:
Sell the Panamax vessel MV Xanadu 72,270 dwt built in 1999 for $33.7 million. Delivery to the new owners will take place during the second or third quarter of 2010. The vessel’s charter (at $39,750 per day until July 2013) will be transferred to the vessel purchased below.
Purchase a Panamax vessel about 75,000 dwt built in 2009 for $43 million. Delivery to the Company will take place during the second or third quarter of 2010. Financing from a previously sold vessel will be transferred to finance the purchase of this vessel.
| Financial Strength (8-Jun-2010) | Company | Industry | Sector | S&P 500 |
| Quick Ratio (MRQ) | 0.49 | 1.01 | 1.29 | 0.81 |
| Current Ratio (MRQ) | 0.49 | 1.11 | 1.58 | 0.96 |
| Long-Term Debt to Equity (MRQ) | 33.96 | 99.97 | 558.58 | 133.71 |
| Total Debt to Equity (MRQ) | 92.83 | 120.42 | 81.50 | 199.57 |
Source: Reuters.com, SEC Filings.
Analyst Consensus
| Buy | Outperform | Hold | Underperform | Sell | No Opinion |
This is the consensus forecast amongst 14 polled investment analysts. Against the DryShips Inc company.
| Analyst Detail | Buy | Outperform | Hold | Underperform | Sell | No Opinion |
| Latest | 6 | 4 | 3 | 1 | 0 | 1 |
| 4 weeks ago | 6 | 4 | 3 | 1 | 0 | 1 |
| 2 months ago | 6 | 4 | 3 | 0 | 0 | 2 |
| 3 months ago | 6 | 4 | 3 | 0 | 0 | 2 |
| Last year | 0 | 0 | 6 | 3 | 4 | 1 |
The 12 analysts offering 12-month price targets for DRYS have a median target of 8.00, with a high estimate of 11.00 and a low estimate of 5.00. The median estimate represents a 91.39% increase from the last price of 4.18.
Source: www.ft.com
Consensus Estimates Analysis
| # of Estimates | Mean | High | Low | 1 Year Ago | |
| SALES (in millions) | |||||
| Quarter Ending Jun-10 | 9 | 215.27 | 222.00 | 206.20 | 224.30 |
| Quarter Ending Sep-10 | 8 | 218.24 | 223.11 | 209.54 | 227.20 |
| Year Ending Dec-10 | 15 | 814.31 | 873.18 | 442.40 | 863.47 |
| Year Ending Dec-11 | 14 | 1,120.22 | 1,348.00 | 451.50 | 1,028.14 |
| EARNINGS (per share) | |||||
| Quarter Ending Jun-10 | 10 | 0.21 | 0.26 | 0.12 | 0.26 |
| Quarter Ending Sep-10 | 9 | 0.21 | 0.26 | 0.11 | 0.27 |
| Year Ending Dec-10 | 15 | 0.79 | 0.97 | 0.44 | 0.92 |
| Year Ending Dec-11 | 14 | 1.09 | 1.83 | 0.32 | 1.86 |
| LT Growth Rate (%) | 1 | 18.00 | 18.00 | 18.00 | -50.00 |
Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=DRYS.O
Investment Highlights
Since April 20, shares of DRYS have fallen 32%, bowing under the weight of macro-factors, including the BP oil spill in the Gulf of Mexico and declining charter day-rates.
For the last two years, the Company has worked to build its drillships business through the acquisition of Ocean Rig UDW Inc., which DRYS planned on building up then spinning out, possibly through an initial public offering. However, DRYS previously stated that before an IPO it needs two of its four new ships under long-term charter contracts.
Ocean Rig has secured contracts for the construction of four newbuilding advanced capability ultra-deep water (UDW) drillships, which are to be delivered to DRYS in 2011, and DRYS is scheduled to complete UDW drilling unit in 2011.
The Company owns and operates drybulk carriers and offshore oil deep worldwide. DRYS also owns and operates two ultra-deep water, harsh environment, semi-submersible drilling rigs: Leiv Eiriksson and the Eirik Raude, both employed under time charters with Petroleo Brasileiro S.A. for exploration drilling in the Black Sea, and with Tullow Oil PLC for offshore development drilling in Ghana.
The Company employs its fleet between employment contracts – 100% of the ship days in 2010 and 82% in 2011 are secured under time charters.
The Company’s revenue backlog from the UDW unit and drybulk fleet is approximately $2 billion.
Source: http://www.dryships.com/ , www.yahoo.com , http://shipping.capitallink.com/files/barronsshippingarticle.pdf
Technical Analysis
Source: http://stockcharts.com
DRYS is below its 13-day moving average. This bearish sign is even more significant because the moving average is also trending lower.
DRYS’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, DRYS is trading near its lower Bollinger Band. This suggests that the stock price is low relative to its recent price action.
The MACD for DRYS currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of zero, which implies that the underlying moving averages are trending lower.
Comparative Analysis
| Company Name | Ticker | Price per | Mrkt. Cap. | P/E | P/S | ||
| Jun-8-2010 | symbol | Share, $ | $ Mn | 2010 | 2011 | 2010 | 2011 |
| Diana Shipping Inc. | DSX | 12.01 | 977.99M | 8.31 | n/a | 4.34 | n/a |
| Navios Maritime Holdings | NM | 5.21 | 525.69M | 8.10 | n/a | 0.94 | n/a |
| Genco Shipping & Trading Ltd. | GNK | 15.65 | 499.65M | 3.50 | n/a | 1.46 | n/a |
| Dry Bulk Shipping Median | 667.77M | 6.63 | n/a | 2.24 | n/a | ||
| DryShips Inc. | DRYS | 4.06 | 1.15B | 9.80 | n/a | 1.49 | n/a |
Source: Thomson Financial
Insider Trading Activity
| NET SHARES PURCHASE ACTIVITY
Inside Purchases – Last 6 Months |
||
| Shares | Transaction | |
| Purchases | n/a | n/a |
| Sales | n/a | n/a |
| Net Shares Purchased (Sold) | n/a | n/a |
| Total Insider Shares Held | n/a | n/a |
| % Net Shares Purchased (Sold) | n/a | n/a |
| Net Institutional Purchases — Prior Qtr to Latest Qtr | |
| Shares | |
| Net Shares Purchased (Sold) | n/a |
| % Change in Institutional Shares Held | n/a |
Source: Yahoo Finance
DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice.
The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice. The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.
Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company. An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report. Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.
Any individual who chooses to invest in any securities should do so with caution. Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested. Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.
Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Subscribers are cautioned not to place undue reliance upon these forward looking statements. These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated. Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC. You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.
We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.
To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).
We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.
