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Category: Stock Market and Scorpio Bulkers Inc.
Date: 14 October 2019 Stock Price: $7.28 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of Scorpio Bulkers Inc. a supplier of marine transportation of dry bulk commodities with a carrying capacity of approximately 3.9 million deadweight tonnes.
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About Scorpio Bulkers Inc.
Scorpio Bulkers is a leading international provider of marine transportation of dry bulk commodities. The Company owns and operates a fleet of modern mid to large size dry bulk vessels, specifically Ultramax and Kamsarmax vessels (62,000 and 82,000 deadweight tonnes, respectively). Our vessels carry major bulks such as iron ore, coal, and grain as well as minor bulks such as bauxite, fertilizers, and steel products. The Company’s owned and finance leased fleet has a total carrying capacity of approximately 3.9 million deadweight tonnes. Scorpio Bulkers is a publicly listed company and trades on the New York Stock Exchange under the ticker “SALT.”
Overview of Scorpio Bulkers' latest earnings report
Data below refers to quarterly data unless specified otherwise:
- Revenue: $49.096 million (down from $60.614 million for the same period of the previous year)
- Revenues decreased by -19.04% over the last 12 months
- Expenses: $52.433 million (up from $48.565 million for the same period of the previous year)
- Expenses increased by 7.9% over the last 12 months
- Net earnings: $34.969 million (up from $800 thousand for the same period of the previous year)
- Diluted earnings per share: $0.50 (up from $0.01 for the same period of the previous year)
- PE ratio: 14.6
- Diluted weighted-average shares outstanding: 69.301 million (down from 74.718 million for the same period of the previous year)
- Cash and cash equivalents: $139.302 million
- Cash and cash equivalents per share: $2.01
- Cash and cash equivalents makes up 27.6% of Scorpio Bulkers' market capital
- Cash and cash equivalents makes up 7.8% of Scorpio Bulkers' total assets
- Vessels: $158.364 million
- Vessels makes up 8.89% of Scorpio Bulkers' total assets
- Stockholders equity in Scorpio Bulkers: $893.752 million
- Stockholders equity per share: $12.89
- So Scorpio Bulkers' is trading a 0.56 times its stockholders equity which is outside the expected range of between 2 and 4 which most firms ten to trade at. Most firms tend to trade at at least 1 times its stockholders equity. Reason for this is that if the firm sells all its assets, settles all its liabilities and pays the rest to stockholders the stockholders equity shows what each stockholder would get back. So essentially if a firm trades at less than 1 times its stockholders equity it is trading at a discount to its net assets.
- Cash generated from operations (for the 6 months): $3.813 million
- Cash generated from operations per share (for the 6 months): $0.05
Scorpio Bulkers' management commentary on the results
MONACO, July 22, 2019 (GLOBE NEWSWIRE) -- Scorpio Bulkers Inc. (NYSE: SALT) (“Scorpio Bulkers”, or the “Company”), today reported its results for the three months ended June 30, 2019. The Company also announced that today, its Board of Directors declared a quarterly cash dividend of $0.02 per share on the Company’s common shares.
For the second quarter of 2019, the Company’s GAAP net income was $35.0 million, or $0.50 per diluted share, including:
For the same period in 2018, the Company’s GAAP net income was $0.8 million, or $0.01 per diluted share. Total vessel revenues for the second quarter of 2019 were $49.1 million, compared to $60.6 million for the same period in 2018. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarters of 2019 and 2018 were $65.2 million and $28.1 million, respectively
Recent Significant Events
Vessel Sales
In June 2019, the Company completed the sale of the SBI Electra and SBI Flamenco, two 2015 Chinese built Kamsarmax vessels that the Company agreed to sell in March 2019, for approximately $48.0 million in aggregate. The Company recorded a loss of approximately $7.8 million, including the write-off of deferred financing costs, during the first half of 2019. During the second quarter of 2019, the Company’s Board of Directors made the decision to sell two Ultramax vessels and as such these vessels were classified as held for sale at June 30, 2019. The Company recorded a loss of approximately $4.9 million in the second quarter of 2019 and expects to write-off deferred financing costs of $0.2 million upon closing of the sale and repaying the outstanding debt.
Dividend
In the second quarter of 2019, the Company’s Board of Directors declared and the Company paid a quarterly cash dividend of $0.02 per share totaling approximately $1.4 million. On July 22, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.02 per share, payable on or about September 13, 2019, to all shareholders of record as of August 15, 2019. As of July 22, 2019, 72,487,958 shares were outstanding.
For the second quarter of 2019, the Company’s GAAP net income was $35.0 million, or $0.50 per diluted share, including:
- a non-cash gain of approximately $52.6 million and cash dividend income of $0.5 million, or $0.77 earnings per diluted share, primarily from the Company’s equity investment in Scorpio Tankers Inc.;
- a write-down of assets held for sale of approximately $5.2 million, or $0.08 per diluted share, related to the classification of two Ultramax vessels as held for sale, and the write-off of deferred financing costs on the credit facilities related to the SBI Electra and SBI Flamenco; and
- the write-off of deferred financing costs of approximately $2.7 million, or $0.04 per diluted share, related to the refinancing of existing debt.
For the same period in 2018, the Company’s GAAP net income was $0.8 million, or $0.01 per diluted share. Total vessel revenues for the second quarter of 2019 were $49.1 million, compared to $60.6 million for the same period in 2018. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarters of 2019 and 2018 were $65.2 million and $28.1 million, respectively
Recent Significant Events
Vessel Sales
In June 2019, the Company completed the sale of the SBI Electra and SBI Flamenco, two 2015 Chinese built Kamsarmax vessels that the Company agreed to sell in March 2019, for approximately $48.0 million in aggregate. The Company recorded a loss of approximately $7.8 million, including the write-off of deferred financing costs, during the first half of 2019. During the second quarter of 2019, the Company’s Board of Directors made the decision to sell two Ultramax vessels and as such these vessels were classified as held for sale at June 30, 2019. The Company recorded a loss of approximately $4.9 million in the second quarter of 2019 and expects to write-off deferred financing costs of $0.2 million upon closing of the sale and repaying the outstanding debt.
Dividend
In the second quarter of 2019, the Company’s Board of Directors declared and the Company paid a quarterly cash dividend of $0.02 per share totaling approximately $1.4 million. On July 22, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.02 per share, payable on or about September 13, 2019, to all shareholders of record as of August 15, 2019. As of July 22, 2019, 72,487,958 shares were outstanding.
Scorpio Bulkers Inc. (NYSE: SALT) stock price history
The image below, obtained from Google, shows the stock price history of Scorpio Bulkers over the last 5 years. And it's been a horror show for Scorpio Bulkers stockholders. 5 years ago the stock was trading at around $58.20 a stock and its currently trading at $7.28 a stock. That's a significant loss of -87.49% suffered by Scorpio Bulkers stockholders over the last 5 years.
The stock of Scorpio Bulkers is trading at a lot closer to its 52 week high of $7.67 than it is to its 52 week low of $3.67, which to us is an indication that the short term sentiment and momentum of Scorpio Bulkers' stock is positive at this point in time.
The stock of Scorpio Bulkers is trading at a lot closer to its 52 week high of $7.67 than it is to its 52 week low of $3.67, which to us is an indication that the short term sentiment and momentum of Scorpio Bulkers' stock is positive at this point in time.
Scorpio Bulkers (NYSE: SALT) latest stock valuation
So what is Scorpio Bulkers' stock worth based on the release of their latest earnings report? While the firm technically made a profit for their 2nd quarter of their 2019 fiscal year, this was due to income from equity investments and not from their own operating activities. Their own operating activities recorded a operating loss of almost $3.4 million. And the cash generated from operations is negligible for the 6 months of their fiscal 2019. Under such circumstances it is hard to value a company's stock and our base for stock valuation should the firm be loss making is to use the stockholders equity per share as base valuation. In this case we value Scorpio Bulkers at $12.89 a stock, which is their stockholders equity per share. However if Scorpio Bulkers' continue to make operating losses the firm will have to issue stock to raise money to keep them afloat or sell assets to keep them afloat, both of which would dilute the current stockholders equity per share. We therefore caution investors against thinking that Scorpio Bulkers is a bargain due to it trading at well below its stockholders equity per share.
We rate Scorpio Bulkers as avoid and would not recommend that fundamental or long term investors buy into Scorpio Bulkers until the company returns to profitability and does so on a sustainable and long term basis.
We rate Scorpio Bulkers as avoid and would not recommend that fundamental or long term investors buy into Scorpio Bulkers until the company returns to profitability and does so on a sustainable and long term basis.
Next earnings release date for Scorpio Bulkers
It is expected that Scorpio Bulkers 3rd quarter 2019 earnings report will be released on 21 October 2019