Diana Shipping (US:DSX)

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Diana Shipping (US:DSX)

Post  Max on Thu Jan 27, 2011 10:58 am

Bought and Sold for 1% gain in 1 day. Moving a little too fast for analysis. Valuation looked good, but later read about a spinoff and suspected that perhaps all is not as it seems. Waiting for new financials to reassess.

Max
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Re: Diana Shipping (US:DSX)

Post  Max on Thu Feb 03, 2011 1:38 am

Diana doing pretty well today. Too bad I sold all mine for a quick gain in order to buy CCME.

I checked out the financials and like what I see. I added up the value of their charter contracts and expect their next few quarters earnings to be consistent to slightly less than previous. If that is the case, then this stock is nicely undervalued. Too bad the entire shipping sector is such a disaster right now, but that only provides opportunities.

Max
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Re: Diana Shipping (US:DSX)

Post  Max on Fri Feb 25, 2011 3:27 am

Cash $4.26
Book Value $11.00 (including approx 30% reduction to vessels to be conservative)
Debt $4.94
Current Assets to Current Liabilities 10.78x

EPS $1.55 last year and despite the tough market, has grown to $1.60 this year. By adding the value of the charters, I expect slightly less next year.

Current Share Price $12.00 which is a PE of less than 10 (>10% ROI).

Pros:
-Dividend reinstatement could result in large increase to share price as it attracts income investors.
-Current share price is very close to conservative estimate of book value, which limits downside risk to $1-2 (approx 8%-17%) in extreme.
-Financially stable, lots of cash, and easily able to pay current liabilities regardless of earnings
-Earnings still positive and providing good ROI in tough market
-PE is 7.5, which translates to an expected ROI of 13.33%
-Shipping rates at historic lows, and will recover with global recovery in economic activity. No economic alternative for bulk intercontinental transport.
-Headquarters in Marshall Islands, and all revenues are in USD, so has little exposure to Greece crisis.

Cons:
-May not reinstate the dividend. Comments mention they are planning on keeping the cash to pay off debt, but vessels, or make it easier to comply with loan covenants. The stock needs to reinstate the dividend to have a significant impact on share price.
-Shipping market is getting more competitive. Huge amount of ships being built.
-Global markets may move toward recession again, and this may lead to a prolonged period of low revenues.

Summary:
-Overall, I like the stock, but am not sure if the timing is right. It make take a long time to see an increase in charter rates. It is a buy and hold type of stock waiting for the reinstatement of the dividend.

I am buying a small amount to hold. Looking to sell at $14, but expect this stock to show steady gains for those with more patience than me.

Max
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Re: Diana Shipping (US:DSX)

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