美股航運(yùn)業(yè)干散貨2018q3盈利預(yù)覽

17OctoberQ3/18DryBulkEarningsIt'sSupplyvs.DemandandSupplyisWinning;DowngradeSALT,UpgradeNMMThedrybulksectoroverthepastquarterhasbehavedlikeashippingsegmentthathasreachedamodestpeak,asperiodratesandsecondhandassetvalueshavepulledbackmodestlyoverthepastfewmonths.Thishashadbeneficialeffectsonthesupplyside,asnewordersremainlow.Wecontinuetoseeafairlybalancedoutlookin2019beforethepositivesupplyeffectsfromIMO2020kickin(slowerspeeds,higherscrapping).SBLKisourfavoritestockinthesectorgivenitsupsidepotentialandfulluseofNoahR.Parquette,CFABloombergJPMAPARQUETTE17OctoberQ3/18DryBulkEarningsIt'sSupplyvs.DemandandSupplyisWinning;DowngradeSALT,UpgradeNMMThedrybulksectoroverthepastquarterhasbehavedlikeashippingsegmentthathasreachedamodestpeak,asperiodratesandsecondhandassetvalueshavepulledbackmodestlyoverthepastfewmonths.Thishashadbeneficialeffectsonthesupplyside,asnewordersremainlow.Wecontinuetoseeafairlybalancedoutlookin2019beforethepositivesupplyeffectsfromIMO2020kickin(slowerspeeds,higherscrapping).SBLKisourfavoritestockinthesectorgivenitsupsidepotentialandfulluseofNoahR.Parquette,CFABloombergJPMAPARQUETTETable1:Selectrate$perDemandrisksappearinginironore.SustainedhighdemandgrowthforhighqualityironorehasbeentheunderlyingdriverfortheCapesizesegmentinrecentyears.WecontinuetoseetailwindsintheformofstrongBrazilianoutput(longerdistances)andgoodChinesesteelmillprofitability,butthisyearwe’vealsostartedtoseehigherChinesedomesticproductionandincreasinguseofsteelscrap,whichcouldlowerdemandgrowthoverthiscycle.Asaresult,wehavecutourdemandgrowthestimatesforironorethrough2021.Supplysidelookinggreat.TherecontinuestobefairlylowordersofnewshipsinQ3,andtheorderbookhasdroppedbackbelow10%ofthefleet.Secondhand/newbuildratioshavekeptneworderslessattractive,andsofteningsentimenthasalsolikelydampenedorders.Weseefairlyrestrainedfleetgrowththrough2020evenwithlowscrappingrates.Introducingformalagediscounttoforecasts.We’veincorporatedagerangesfrom100%foranewshipto75%fora25-yearoldvessel,andisbasedonvesselclassandupdatedannually.SALThastheyoungestfleet,whileNMhastheoldest(seepage11).Source:J.P.MorganFigure1:Q3/18stock%Source:DowngradingSALT,upgradingNMM.WearedowngradingSALTtoNeutral(fromOW)asaresultofitsrelatedpartytransactionsandrecentinvestmentinSTNG.WearereplacingitwithNMMasanOWwithinthesector.OurtoppickremainsSBLKwitha$20Dec-19PT.EquityRatingsandPriceMktCap($mn) Price DianaDSXPriceNGoldenOceanScorpioBulkersSALTUSSBLKUSNMUSNMMUS——Source:Companydata,Bloomberg,J.P.Morganestimates.n/c=nochange.Allpricesasof16OctSeepage30foranalystcertificationandimportantJ.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision. 每日每日免費(fèi)獲取報(bào)（增值服務(wù)關(guān)注回復(fù)：研究加入“起點(diǎn)財(cái)經(jīng)”微信群(1-212)622-922417OctoberDryBulkIndustryIronoreIronoreimportsintoChinawere273MTinQ3/18,upmodestlyfrom260MTinQ2/18butdowny/yfrom278MTinQ3/17.Intotal,2018ironoreimportsareontracktobeflatin2018,despiterelativelystrongdemand,asdomesticproductionhasfilledthegaps.Overall,mostoftheincreaseinproductionfromthemajorshascomefromVale.SeethisnoteforJPM’sMetalsandMiningteamlatestoutlookonironFigure2:(1-212)622-922417OctoberDryBulkIndustryIronoreIronoreimportsintoChinawere273MTinQ3/18,upmodestlyfrom260MTinQ2/18butdowny/yfrom278MTinQ3/17.Intotal,2018ironoreimportsareontracktobeflatin2018,despiterelativelystrongdemand,asdomesticproductionhasfilledthegaps.Overall,mostoftheincreaseinproductionfromthemajorshascomefromVale.SeethisnoteforJPM’sMetalsandMiningteamlatestoutlookonironFigure2:Chineseironoreimports(left)andironoreportstockpilesbillionston-milesand,000LTMLTMChineseIronOrePortStockpiles(,000Source:J.P.Morganestimates,Figure3:Chinesesteelproduction+demand(left)andsteelmillprofitabilitymilliontonsand00GrowthDemandGrowthIronCokingSource:J.P.Morganestimates,CoalCoalimportsintoChinawere83MTinQ3/18,upfrom70MTinQ2/18and72MTinQ3/17.Thestrengthhasbeenseeninboththermalandcokingcoalimports.Notably,theswitchfromcoaltogaspowergeneration.However,thereisriskthatanElNinoupdatedoutlookforcoal.2Jul-Jan-(1-212)622-922417OctoberFigure4:Chinesecoalimports(left)andportstockpilesofcoalmillionstonsandbillion(1-212)622-922417OctoberFigure4:Chinesecoalimports(left)andportstockpilesofcoalmillionstonsandbillionton-Jan-Jul-15Jan-16Jul-Jan-17Jul-17Jan-18Jul-ChinaCokingCoalChinaThermalCoalChineseThermalCoalPortStockpiles(,000Source:J.P.Morganestimates,March2018,soit’sdifficulttogetadetailedviewonimportsourcesaftertheinthelatefall.Figure5:Chinesesoybeanbillionton-LTMSoybeanLTMfromapeakof10.8%inMarch.theendof2017)andaPanamaxat$27.5million(upfrom$25million).However,ratiodownto72%(peakedat77%inMarch).Thisratiostillbelow80%givesussomeTable2below),givingusmorecomfortforfleetgrowththroughtheendof2019.3(1-212)622-922417OctoberTable2:Topdrybulkshipyardsanddeliverydateofrecentmillion123456789JiangsuNewYZJNewTimesSBBeihaiShipyardTsuneishiCebuImabariSBSaijoJMUAriakeShipyardTianjinXingangHIChengxiShipyardBohaiShipbld.Late2020/earlyLate2020/earlyMidLate2020/earlyMidMidLateMidMidSource:ClarksonResearchServices.J.P.MorganFigure6:Newbuildordersandsecondhand/newbuildpriceratio(5-year)onleft/Secondhandvesselstradedonmillion-20012005200920132015NewbuildSecondhand/NewbuildSource:ClarksonResearchFigure7:(1-212)622-922417OctoberTable2:Topdrybulkshipyardsanddeliverydateofrecentmillion123456789JiangsuNewYZJNewTimesSBBeihaiShipyardTsuneishiCebuImabariSBSaijoJMUAriakeShipyardTianjinXingangHIChengxiShipyardBohaiShipbld.Late2020/earlyLate2020/earlyMidLate2020/earlyMidMidLateMidMidSource:ClarksonResearchServices.J.P.MorganFigure6:Newbuildordersandsecondhand/newbuildpriceratio(5-year)onleft/Secondhandvesselstradedonmillion-20012005200920132015NewbuildSecondhand/NewbuildSource:ClarksonResearchFigure7:SecondhandCapesize(5-yearsold)valuation$in0ValuationGap-(trailing5-Year5-YearSource:J.P.Morganestimates,ClarksonResearch4Sep- %of(1-212)622-922417OctoberScrappingAscanbeexpectedgivensentiment,scrappinghasbeenalmostnon-existent,withtheentirefleetaveragingabout0.5%sofarin2018.Whileweexpectscrappingtoremainlowin2018andearly2019,weseesomepotentialforscrappingtoincreaseaftertheballastwatertreatmentregulationsinSeptember2019andtheIMOSulphurregulationsin2020.About6%ofthefleetisabove20yearsoldand13%isabove15yearsold.Figure8:(1-212)622-922417OctoberScrappingAscanbeexpectedgivensentiment,scrappinghasbeenalmostnon-existent,withtheentirefleetaveragingabout0.5%sofarin2018.Whileweexpectscrappingtoremainlowin2018andearly2019,weseesomepotentialforscrappingtoincreaseaftertheballastwatertreatmentregulationsinSeptember2019andtheIMOSulphurregulationsin2020.About6%ofthefleetisabove20yearsoldand13%isabove15yearsold.Figure8:Drybulkannualized 2018avg= Source:J.P.Morganestimates,ClarksonResearchWearemakingseveralchangestooursupply/demandImplementing2022forecasts(1%ironoredemandgrowthand1.5%remainderofdrybulkdemandgrowth)Lowering2020scraprateto1.0%(from2.25%/2.5%)withtheassumptionthat2020ispotentialpeakyear.Loweringour2018demandforecastto1.75%ironoregrowth(1.3%ton-Keepingfleetslowdownassumptionstartingin2020duetoIMOSulphurBasedonourforecasts(Tables2and3below),weseesomemodestfirmingthroughin2019,withapeakin2020astheIMOSulphurregulationscausethefleettoslowdownasaresultofthehigherfuelcosts.Giventhelackofnewbuildorders,weremainconfidentinournear-termforecasts,althougharecoveryisstillvulnerabletoshiftsinscrappinglevels,newvesselorders,deteriorationindemand,oramaterialincreaseinvesselspeed.5(1-212)622-922417OctoberFigure9:Drybulkfleetsupplygrowthexpectationsgross/net–Capesize(left)vs.restofdrybulk%y-o-y--2014201520162017201820192020Source:J.P.Morganestimates,ClarksonResearchFigure10:Drybulkfleetsupply/demandbalance–Capesize(left)vs.Panamaxutilizationand$per001999200220052008201120171999200220052008201120142017CapesizeSource:J.P.Morganestimates,ClarksonResearchServices.“Utilization”(1-212)622-922417OctoberFigure9:Drybulkfleetsupplygrowthexpectationsgross/net–Capesize(left)vs.restofdrybulk%y-o-y--2014201520162017201820192020Source:J.P.Morganestimates,ClarksonResearchFigure10:Drybulkfleetsupply/demandbalance–Capesize(left)vs.Panamaxutilizationand$per001999200220052008201120171999200220052008201120142017CapesizeSource:J.P.Morganestimates,ClarksonResearchServices.“Utilization”iscalculatedaston-miledemanddividedbyton-milesupply(fleetdwt*24*365*speed*congestionfactor)asapercentageofahypotheticalfullvesselemployment(42%forCapesizeand59%forthesmallerships).6(1-212)622-922417OctoberTable3:Drybulk(1-212)622-922417OctoberTable3:Drybulksupply/demandmodel–milliontons,billionton-miles,,nauticalmiles,knots,milliondwt,and$perNote:Assumptionsinblue.Fleetsupplyforecastassumesexistingorderbookwith10%cancellationrateand30%slippagerate(pushbacktofollowingyear),aswellas7.5milliondwtofnewordersfor2020,10milliondwtofnewordersfor2021delivery,and15milliondwtofnewordersfor2022delivery.RateforecastbasedonahistoricalbestfitlineusingEffectiveUtilizationastheindependentvariable.7 IronOre GrowthDistanceDemand CongestioTon-Begin / TMdemandNormal EffectiveCapesizeTMsupplyLaden (1-212)622-922417OctoberTable4:Drybulksupply/demand(1-212)622-922417OctoberTable4:Drybulksupply/demandmodel–Panamaxandmilliontons,billionton-miles,,nauticalmiles,knots,milliondwt,and$perSource:J.P.Morganestimates,ClarksonResearchServices,Note:Assumptionsinblue.Fleetsupplyforecastassumesexistingorderbookwith10%cancellationrateand30%slippagerate(pushbacktofollowingyear),aswellas15milliondwtofnewordersfor2020,20milliondwtfor2021delivery,and25milliondwtfor2022delivery.RateforecastbasedonahistoricalbestfitlineusingEffectiveUtilizationastheindependentvariable.8 GrowthDistanceDemand CongestioTon-Begin / TMdemandNormal EffectivePanamaxHandymaxTMsupplyLaden (1-212)622-922417OctoberSpotRateand(1-212)622-922417OctoberSpotRateandEstimateExpect2020tobecyclepeak,introducing2022WeareadjustingourrateassumptionsforQ3/18toreflectactualrates,asweweretooacrossallvesselclasses,particularlyCapesizes.Duetoamoremodestdemandforecast,webringinour2021expectationsandcementourviewthat2020willbethecyclepeak.Wealsointroduce2022forecasts,whichcontinuesthedowncyclethatweexpecttostartin2021.Table5:Drybulkspotrate$perSource:J.P.Morganestimate,ClarksonResearchAsforestimates,wehavepassedournewrateforecaststhroughourmodels(seeTables6and7).Givenstheirlowcoststructure,spotexposure,andupsidepotential,SBLKremainsourtoppickindrybulk,wealsokeepourOWratingonGOGL.WealsoreplaceSALTwithNMMforourthirdOWrating,anddowngradeSALTtoNeutral(fromOW)andlowerourPTto$8(from$9.50)dueprimarilytorelatedpartytransactions.Table6:Drybulkuniverse–EBITDAforecastsvs.$inmillions,exceptpershareSource:J.P.Morganestimates,9Q3/18E 2018E 2019ECompany JPM JPM JPM JPM JPM JPM DianaShippingGoldenOceanNaviosMaritimeHoldingsNaviosMaritimePartnersScorpioBulkersStarBulk (1-212)622-922417OctoberTable7:Drybulkuniverse–EPSforecastsvs.(1-212)622-922417OctoberTable7:Drybulkuniverse–EPSforecastsvs.$inmillions,exceptpershareSource:J.P.Morganestimates,Table8:Drybulkuniverse–NAVmultiplebuild-upandratings/YE18price$perSource:J.P.MorganNAVaccretion/dilution.Table9belowisameasurementofhowmuchcashflowacompanygeneratesrelativetothenaturaldepreciationofitsfleetastheshipsage.NegativenumberssuggestthatNAVisnotbeingreplenishedfromcashflowgeneration,whilepositivenumbersindicateNAVcouldincreaseovertime.SBLK,ourfavoritestockinthedrybulkspace,isaleaderinthismetricwith46%NAVaccretionthrough2022.Table9:NAVaccretion/dilution%Source:J.P.MorganQ3/18E 2018E 2019ECompany JPM JPM JPM JPM JPM JPM - - - NaviosMaritimeHoldings - - - - - - StarBulk -NAVaccretion/dilutionas%fleet -- Parties PriceTarget DianaShippingGoldenOceanNaviosMaritimeHoldingsNaviosMaritimePartnersScorpioBulkersStarBulk---(1-212)622-922417October(1-212)622-922417OctoberIntroducingformalagediscounttoforecasts.We’veincorporatedagediscountsintothefinancialmodelsforourdrybulkcoverage.Thediscountrangesfrom100%foranewshipto75%fora25-yearoldvessel,andisbasedonvesselclassandupdatedannually.SALThastheyoungestfleet,whileNMhastheoldest(seeTable10below).Table10:Averageageandrateyearand--Source:J.P.Morgan Avgage Avgage Avgage Avgage (1-212)622-922417OctoberDianaDianaShippingInc(DSX;DSXCompany FYE(1-212)622-922417OctoberDianaDianaShippingInc(DSX;DSXCompany FYE2016A2017A2018E2018E2019E2019E2020E2020EPrice($)PriceTarget52-weekRange($)MarketCap($mn)16-Oct-31-Dec-5.16-(Prev)Q1(Mar)Q2(Jun)Q3(Sep)Q4(Dec)EBITDAFY($(0.34)(0.04)A(0.26)0.00A SharesO/S Source:Companydata,Bloomberg,J.P.MorganInvestmentThesis,ValuationandRisksDianaShipping(Neutral;PriceTarget:$5.00)InvestmentThesisWithitsrelativelylowleverage,smallnewbuildprogram,andhighcharterDSXhasoneofthelowestriskprofilesinourdrybulkcoverageuniverse,inourview.Weexpectittocontinuecharteringitsvesselsusingaportfolioapproach.Webelievethislow-riskprofilealsolimitsupsidepotentialvs.morespot-orientedcompanies.WehaveaNeutralrating.OurprimarybenchmarkinevaluatingshippingcompanyvaluationsisNetAssetValue(NAV).Thismetrictakesintoaccounttheoverallmarketvalueofacompany’sassetsbasedonquotedpricesfromshippingbrokers,adjustedforbalancesheetitems.Giventhatshippingingeneralisahighlycyclicalindustry,wepreferto“normalize”NAVbasedonadepreciatedvalueusingmediannewbuildprices,whichwebelieveisagoodproxyformid-cycleassetvalues.Furthermore,wealsoadjustforanychartersthatmaybeaboveorbelowthecurrentmarketbasedonadiscountedcashflowrelativetoourrateforecast.ThetablebelowshowsourNAVestimateforDSXattheendof2019aswellasanestimateofhowmuchcashflowcanbegeneratedrelativetothelossinvalueofthefleetasitages.Usingdepreciatednewbuildvalues,NAVis$6.06,whileusingcurrentassetvalues,NAVis$5.33.Becauseofthestock’shightradingliquidity,offsetbylessidealmarket,weusea0.8xmultipleto2019EnormalizedNAVtovalueDSX.WemaintainourDec-19pricetargetof$5.(1-212)622-922417OctoberTable11:DSXNAVcalculation–$inthousands,exceptper(1-212)622-922417OctoberTable11:DSXNAVcalculation–$inthousands,exceptpershareSource:J.P.Morganestimates,Companydata,ClarksonResearchServices.VesseldatagobacktoTable12:DSXNAV$inthousands,exceptpershareFleetvaluebeginningofEBITDAlessinteresttofleetdepreciation((X-Y)/Shareoutstanding.Source:J.P.Morganestimates,Companydata,ClarksonResearchServices.Vesseldatagobackto2000.Fleetvaluedepreciationistheestimateddecreaseinmarketvalueovertherelevanttimeperiod.RiskstoRatingandPriceReductioninassetvaluescouldimpactborrowingcapacity:Shippingdebtingeneral,andthecompany’sfacilitiesinparticular,aretypicallysecuredbyfirstmortgagesonthevessels.Adeclineinthemarketvalueofthecompany’sfleetcouldnegativelyimpactthecompany'sborrowingcapacityand/orresultinnon-complianceunderrestrictivecovenants.Customerconcentration:In2017,43%ofthecompany’srevenueswerederivedfromthreecharterers.Ifoneormoreofthesechartererswasunabletoperformunderitscontract,itcouldnegativelyimpactthecompany’sprofitability.Highchartercoverage:AhighproportionofDSX’sfleetrelativetothepeeruniverseisemployedunderlong-termcharters.Assuch,earningsaremoreinsulatedtonear-termweaknessinrates,whichmaycontributetothestockunderperformingitspeersifdrybulkratesrebound,oroutperformingitspeersifdrybulkratesNAVaccretion/dilutionas%offleetvalue((X-Y-Z)/F TotalNAVaccretion/dilutionas%offleetvalueat12/31/17- Value($mBalanceSheet- Vessels, Vessel NetAsset (1-212)622-922417OctoberGoldenCompany FYE2016A2017A2018E2018E2019E2019E(1-212)622-922417OctoberGoldenCompany FYE2016A2017A2018E2018E2019E2019E2020E2020EPrice($)MarketCap($mn)FiscalYearEndSharesO/S(mn)PriceTarget($)16-Oct-10.05-Q1(Mar)Q2(Jun)Q3(Sep)Q4(Dec)EBITDAFY($(0.61)(0.11)(0.26)(0.03) PriceTargetEnd 31-Dec-InvestmentThesis,ValuationandRisksGoldenOcean(Overweight;PriceTarget:$12.00)InvestmentThesisGOGLhassubstantialexposuretotheCapesizesegmentofdrybulk,combinedwithitsoperatingleverageandlowcoststructure,shouldleadtooutperformanceinadrybulkrecovery.WemaintainourOWrating.OurprimarybenchmarkinevaluatingshippingcompanyvaluationsisNetAssetValue(NAV).Thismetrictakesintoaccounttheoverallmarketvalueofacompany’sassetsbasedonquotedpricesfromshippingbrokers,adjustedforbalancesheetitems.Giventhatshippingingeneralisahighlycyclicalindustry,wepreferto“normalize”NAVbasedonadepreciatedvalueusingmediannewbuildprices,whichwebelieveisagoodproxyformid-cycleassetvalues.Furthermore,wealsoadjustforanychartersthatmaybeaboveorbelowthecurrentmarketbasedonadiscountedcashflowrelativetoourrateforecast.ThetablesbelowshowourNAVestimateforGOGLattheendof2019aswellasanestimateofhowmuchcashflowcanbegeneratedrelativetothelossinvalueofthefleetasitages.Usingdepreciatednewbuildvalues,NAVis$9.24,whileusingcurrentassetvalues,NAVis$8.46.Becauseofthecompany’slowcoststructure,lackofrelatedpartytransactions,useofscrubbers,andhightradingliquidity,weuseanew1.3xmultiple(from1.2x)to2019EnormalizedNAVtovaluethecompany,whichresultsinournewDec-19pricetargetof$12(from$11).Table13:GOGLNAVcalculation–$inthousands,exceptpershareSource:J.P.Morganestimates,Companydata,ClarksonResearchServices.VesseldatagobacktoValue($mBalanceSheet- Vessels, Scrubbers 3-NetAsset (1-212)622-922417OctoberTable14:GOGLNAV$(1-212)622-922417OctoberTable14:GOGLNAV$inthousands,exceptpershareEBITDAlessinteresttofleetdepreciation((X-Y)/.Source:J.P.Morganestimates,Companydata,ClarksonResearchServices.Vesseldatagobackto2000.FleetvaluedepreciationistheestimateddecreaseinmarketvalueovertherelevanttimeperiodRiskstoRatingandPriceReductioninassetvaluescouldimpactborrowingcapacity:Shippingdebtingeneral,andthecompany’sfacilitiesinparticular,aretypicallysecuredbyfirstmortgagesonthevessels.Adeclineinthemarketvalueofthecompany’sfleetcouldnegativelyimpactthecompany’sborrowingcapacityand/orresultinnon-complianceunderrestrictivecovenants.Conflictsofinterest:Certainofthecompany’sdirectors,executiveofficersandshareholdersmayhaveinterestsdifferentfromitspublicshareholders.Particularly,HemenHoldings,indirectlycontrolledbyJohnFredriksen,isamajorshareholderofGoldenOceanbutalsohasstakesinothercompanies,includingFrontline,Frontline2012,ShipFinanceInternational,Seadrill,andNorthAtlanticDrilling.Spotmarketexposure:Asubstantialportionofthecompany’sfleetistradedonthespotmarket,incommercialpools,orunderindex-linkedcharters.Assuch,thecompany’searningscouldbeexposedtothevolatilitythatisinherentinthedrybulkspotmarket.Highspotexposurecouldleadtothestockunderperformingpeerswithhigherchartercoverageintheeventdrybulkratesdeteriorate.NAVaccretion/dilutionas%offleetvalue((X-Y-Z)/F TotalNAVaccretion/dilutionas%offleetvalueat12/31/17 (1-212)622-922417OctoberNaviosMaritimeNaviosMaritimeHoldingsInc(NM;NMCompany(1-212)622-922417OctoberNaviosMaritimeNaviosMaritimeHoldingsInc(NM;NMCompany FYE2016A2017A2018E2018E2019E2019E2020E2020EPrice($)MarketCap($mn)SharesO/S(mn)PriceTarget($)16-Oct-1.90-—(Prev)Q1(Mar)Q2(Jun)Q3(Sep)Q4(Dec)EBITDAFY($(0.37)(0.26)A(0.27)(0.26)A(0.23)(0.12)(0.86) PriceTargetEnd Source:Companydata,Bloomberg,J.P.MorganInvestmentThesis,ValuationandRisksNaviosMaritimeHoldings(Underweight;—)InvestmentThesisNaviosMaritimeHoldingsistheparentcompanyfortheNaviosGroupcompanies,whichincludesNMM,NNA,NAP,andNaviosLogistics(private).Assuch,thecompanyhassignificantexposuretosectorsoutsideofitscoredrybulkoperations.WhilearecoveryinthedrybulkmarketshouldtakepressureoffofNM’sliquiditysituation,wedonotseematerialupsideintheequity.Givenourreturnexpectationsrelativetotherestofourshippingcoverageuniverse,wemaintainourUnderweightrating.Ourprimarybenchmarkinevaluatingshippingcompanyvaluationsisnetassetvalue(NAV).Thismetrictakesintoaccounttheoverallmarketvalueofacompany’sassetsbasedonquotedpricesfromshippingbrokers,adjustedforbalancesheetitems.Giventhatshippingingeneralisahighlycyclicalindustry,wepreferto“normalize”NAVbasedonadepreciatedvalueusingmediannewbuildprices(fromcurrent),whichwebelieveisagoodproxyformid-cycleassetvalues.Furthermore,wealsoadjustforanychartersthatmaybeaboveorbelowthecurrentmarketbasedonadiscountedcashflowrelativetoourrateforecast.ThetablesbelowshowourNAVestimateforNMattheendof2019aswellasanestimateofhowmuchcashflowcanbegeneratedrelativetothelossinvalueofthefleetasitages.Usingdepreciatednewbuildvalues,NAVis($0.90,whileusingcurrentassetvalues,NAVis($1.41).(1-212)622-922417OctoberTable15:NM(1-212)622-922417OctoberTable15:NMNAVcalculation–$inthousands,exceptpershareSource:J.P.Morganestimates,companydata,ClarksonResearchServices.VesseldatagobacktoTable16:NM$inthousands,exceptpershareSource:J.P.Morganestimates,Companydata,ClarksonResearchServices.Vesseldatagobackto2000.FleetvaluedepreciationistheestimateddecreaseinmarketvalueovertherelevanttimeperiodRiskstoHighoperatingleverage.Inadditiontothehighfinancialleverage,NMhashigheroperatingleveragethanmanyofitspeersthroughitslong-termchartered-infleet.Thiscouldleadtooutperformanceintheeventdrybulkratesdowell.SouthAmericanLogistics.ThecompanyhassignificantexposuretotheHidroviaregionofSouthAmericathroughitsmajorityownershipofSouthAmericanLogistics.ThestockcouldoutperformthedrybulkpeersiftheLogisticsbusinessseesimprovedperformancefromanyofitssectors(PortTerminal,Barges,orSpotmarketexposure:Aportionofthecompany’sfleetistradedonthespotmarketorunderindex-linkedcharters.Furthermore,thecompanyhasadditionaloperatingleveragefromchartered-inships.Assuch,thestockcouldoutperformifspotratesarehigherthanexpected.Value($mBalanceSheet- Vessels, ValueofNavios -NetAsset - - -Value($mBalanceSheet- Vessels, Working Long-term -NetAsset - - - --(1-212)622-922417OctoberNaviosMaritime(1-212)622-922417OctoberNaviosMaritimeCompany FYEPrice($)PriceTarget52-weekRange($)MarketCap($mn)16-Oct-—2.62-Q1(Mar)Q2(Jun)Q3(Sep)Q4(Dec)EBITDAFY($SharesO/S InvestmentThesis,ValuationandRisksNaviosMaritimePartners(Overweight;—)InvestmentThesisWhilewebelievethecompanyhassubstantialpositivesthatdifferentiateitotherdrybulkcompanies,suchaslowleverage,relativelyhighchartercoverage,lowcostbasis,anddiversificationintothecontainershipsector(throughlong-termcharters).WeupgradetoOW(fromNeutral)aswenowbelieveupsideisattractiverelativetotherestofourcoverageuniverse,bothonanormalizedNAVbasisandaNAVaccretionbasis.Ourprimarybenchmarkinevaluatingshippingcompanyvaluationsisnetassetvalue(NAV).Thismetrictakesintoaccounttheoverallmarketvalueofacompany’sassetsbasedonquotedpricesfromshippingbrokers,adjustedforbalancesheetitems.Giventhatshippingingeneralisahighlycyclicalindustry,wepreferto“normalize”NAVbasedonadepreciatedvalueusingmediannewbuildprices(fromcurrent),whichwebelieveisagoodproxyformid-cycleassetvalues.Furthermore,wealsoadjustforanychartersthatmaybeaboveorbelowthecurrentmarketbasedonadiscountedcashflowrelativetoourrateforecast.ThetablesbelowshowourNAVestimateforNMMattheendof2019aswellasanestimateofhowmuchcashflowcanbegeneratedrelativetothelossinvalueofthefleetasitages.Usingdepreciatednewbuildvalues,NAVis$3.48,whileusingcurrentassetvalues,NAVis$2.75.Weusealowerbasemultiple(0.7xvs.0.9xforrestofdrybulkspace)duetotheexposuretothecontainersector.Wealsoadda0.1xpremiumduetothecompany’slowcoststructure,offsetberelatedpartytransactions,resultinginour0.7xmultipleto2019EnormalizedNAVtovaluethe(1-212)622-922417OctoberTable17:NMMNAVcalculation–$inthousands,exceptpershare(1-212)622-922417OctoberTable17:NMMNAVcalculation–$inthousands,exceptpershareSource:J.P.Morganestimates,companydata,ClarksonResearchServices.VesseldatagobacktoTable18:NMM$inthousands,exceptpershareFleetvaluebeginningofEBITDAlessinteresttofleetdepreciation((X-Y)/Shareoutstanding.Source:J.P.Morganestimates,Companydata,ClarksonResearchServices.Vesseldatagobackto2000.FleetvaluedepreciationistheestimateddecreaseinmarketvalueovertherelevanttimeperiodRiskstoConflictsofinterest:NaviosHoldingsownsa2%generalpartnerinterestandan18%limitedpartnerinterest.AlloftheofficersofNMMareofficersofNaviosHoldings,andNMM’sCEOisalsotheCEOofNNA,NAP,andNM.Assuch,