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2022 Could See Shipping Co. Dividends, Buybacks
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The Quick Take

  • Noble Capital Markets has an Outperform rating and a $45 per share price target on Euroseas Ltd.
  • Noble ranks Euroseas Outperform given the favorable outlook for the company in 2022.
  • Euroseas locked in time charter equivalent (TCE) rates for two feeders, the Corfu and Evridiki G, at $40,000 per day ($40K/day) for three years, reported Noble Capital Markets analyst Poe Fratt in a Dec. 29 research note.
  • In 2022, two feeders (the Astoria and the Aegean Express) should be available, in Q1 and Q2, respectively, along with one intermediate, the Akinada Bridge, in Q4.
  • Noble increased its 2022 EBITDA estimate on Euroseas to $109.4 million ($109.4M) from $101.6M, based on TCE rates of $28.5K/day, up from $27K/day.
  • Euroseas' current risk-reward is compelling in light of the 30% drop in the shipper's share price following a Q4/21 miss on operating results.
  • Dividends and/or buybacks are probable in 2022, according to Noble.

The 2022 outlook for Euroseas Ltd. (ESEA:NASDAQ) is positive, and thus, the company could pursue dividends or buybacks this year, noted Noble Capital Markets analyst Poe Fratt.

Three current factors support the favorable outlook, Fratt wrote: a strong container market, expected high cash flow throughout 2022 and the depressed valuation of Euroseas' stock.

As for the firm container market, Euroseas locked in a time charter equivalent (TCE) rate of $40,000 per day for two feeders, which compares to the $42,000 per day ($42K/day) TCE rate for the Oakland intermediate for four years. Also, two feeders and one intermediate will become available to Euroseas at various times in 2022.

"Numerous longer term charters at favorable rates create high forward 2022 cash flow visibility," Fratt added.

In its model of Euroseas, Noble increased 2022 cover to 89% from 80% at a TCE rate of $26K per day, up from $25.3K/day.

Fratt pointed out that Euroseas' current share price of around $25.66 indicates upside potential for investors.

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Disclosures for Noble Capital Markets Inc., Euroseas Ltd., Dec. 29, 2021

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Company Specific Disclosures: The following disclosures relate to relationships between Noble and the company (the "Company") covered by the Noble Research Division and referred to in this research report. Noble has provided capital markets advisory services in the last 12 months. The Company has attended Noble investor conference(s) in the last 12 months. Noble has received compensation for non-investment banking services in the past 12 months. Noble intends to seek compensation for investment banking services and non-investment banking services (securities and non-securities related) within the next 3 months. Noble is not a market maker in the Company. ANALYST CREDENTIALS, PROFESSIONAL DESIGNATIONS, AND EXPERIENCE: Senior Equity Analyst focused in the Transportation & Logistics sector. More than 28 years of experience on the buy-side and sell-side. Holds a history degree from Stanford University and earned an MBA from Cornell University (Johnson School). Named WSJ 'Best on the Street' Analyst twice. FINRA licenses 7, 63, 65, 86, 87. Full Bio & Coverage List.
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