Marketplace Roundtable
Marketplace Roundtable

Episode · 4 months ago

Value Investor's Edge Live #50: Genco Shipping's New Dividend Policy In Full Swing

ABOUT THIS EPISODE

John Wobbensmith, CEO of Genco Shipping (GNK), joined J Mintzmyer's Value Investor's Edge Live on June 14, 2022, to discuss the dry bulk markets and forward prospects and capital allocation. Genco Shipping is a major US-listed dry bulk company with 44 vessels on the water. We discussed overall dry bulk fundamentals, ranging from China's impact on markets to the impact of the Ukraine invasion on midsize trade routes in grain and coal. We also reviewed the economics of GNK's scrubber program and the updated shareholder returns program. Genco will pay out nearly 100% of free cash flow going forward and aims to be net debt free by next year. This interview and discussion is relevant for anyone with dry bulk investments or interest in the overall sector, including Diana Shipping (DSX), Eagle Bulk (EGLE), EuroDry (EDRY), Grindrod Shipping (GRIN), Golden Ocean (GOGL), Navios Maritime Partners (NMM), Pangaea Logistics (PANL), Safe Bulkers (SB), Seanergy Maritime (SHIP), and Star Bulk Carriers (SBLK). Topics Covered (0:00) Intro/Disclosures (1:45) Dry bulk market overview (6:00) Additional color on China dynamics and Ukraine impacts? (10:45) Updated views on market vs. early-2022 expectations? (14:30) Will elevated opex levels remain going forward, or just a one-off? (17:45) Update on scrubber spreads and company strategy? (21:30) Any interest in secondhand vessel acquisitions? (23:30) Desire to further reduce debt or still targeting net debt zero? (25:30) Any interest in repurchases? (27:30) Discussion on the merits of zero net debt strategy. (35:45) Review of newbuild markets, any interest here? (39:00) Why invest in GNK vs. other dry bulk peers?

Welcome to a special edition of the Marketplace Roundtable podcast featuring J mincemeyer of value investor's edge. J first began contributing to seeking Alpha in two thousand and eleven, building up a large following through his work covering shipping stocks, probably about as comprehensively as they're covered anywhere online or in print. Since two thousand and fifteen, J has run the value investor's edge marketplace service here at seeking Alpha. The service offers intensive coverage of deep value opportunities in the shipping, energy, MLP and industrial sectors. You can subscribe to value investors edge by going to seeking Alpha Dot com and typing j mince Meyer, that's M I N T Z M Y E R or value investors edge, into the search board at the top of the site. Before we began, a brief disclaim. Seeking Alpha is a website where authors from around the world share their ideas and analysis on the soccer board. The marketplaces our platform for authors to run investing analysis and idea services so that readers can take their investing to the next level. Nothing on this podcast should be taken as investment advice. And now your host, G Minsmeyer. Good afternoon, welcome to value investor's edge live for recording in the afternoon of June fourteenth. Two, about one o'clock in the afternoon eastern time, we are hosting Jenko shipping the CEO, John Wilmen Smith. We also have a CFO, apostleist afolius, on the line as well. Good afternoon, gentlemen, thanks for joining us today. Good afternoon, thanks for having us. Yeah, absolutely. Before it began, just to reminder, nothing on the call today is going to constitute official company guidance or investment recommendations of any form. I do not currently have a position in Jenko stock. However, this has been recorded on the afternoon of June, so if you listen to recording at a later date, please be advised those positions may have changed. John, again, welcome. Let's jump right into it talking about the overall balance of the dry bull market. We've seen a lot of volatility here to day in the Cape Size, but we've seen a lot more stability, uh, in some of the medium sized ships that you're involved in. What's the primary factor to watch here, and what does this say about the market balance? Yeah, no, look, it's obviously a great question to to to lead off here. I mean clearly capes are double the data of of the minor bulk so naturally they're going to be more volatile. Um you've got fewer players that participate in this market, and China actually, you know, they represent seventy of global iron ore imports. Why? Brazil and Australia makeup of that iron ore trade. Those those exports going into China, whereas supras Um, you know, various trade patterns, including grain and coal, have been rerouted um due to the war in Ukraine. We've had very firm demands for for minable commodities, including peck coat steels, Um excenter fertilizers. There's definitely in some positive impact from the tightness and the container ship market, and then we've had increased fleet inefficiencies in those midsized vessels and a lot of port congestion. I think some of the key dynamics right now the current market is, you know, the impact of the war in Ukraine, those rerouting of the grain and coal cargo flows Um, that that we've seen. Because of the high bunker prices, we've seen the fleet overall slow down. So that's been helpful from a freight rate standpoint. Higher commodity prices are also are also helpful, Um, to the dryball trade. We've definitely unfortunately, we we predict there will be potential grain shortages as the year progresses. So I think there's a lot of uh stockpiling, at least at least trying to stockpile, that's going on on the grain side right now. And we've definitely seen a strong trade on the coal front into the Atlantic, Um, as we've you know, as they're coming to terms with, uh, the...

European ban on Russian coal. But on the on the negative side, we haven't seen iron ore flow out of the out of the Ukraine, for very obvious reasons. A couple other things that are that have an effected the market. We have a very high scrubber spread right now and, as you know, we have scrubbers on all seventeen of our cape size vessels spread as anywhere between four hundred and five hundred dollars a ton in Singapore, Um, after being below a hundred for for quite a while. Um. As I said, that cold trade has been strong increased longer ton miles. The Brazilian iron ore trade is slowly starting to improve from early in the year, but it has not ramped up yet and that's been a little slower than than what we would have anticipated. Um, we believe it's a combination of production delays in Brazil as well as China's zero covid policies that we've seen over the past few months there has been some easing of poor congestion, which has been why we widely reported. So again, we think that's temporary. We think that short term, Um, in terms of impacting the actual supply and demand balance of the fleet. And on a positive note, we've seen China steel meal utilization improving off of the off of the February low, which is clearly supporting not only iron ore imports but China's steel exports. So a lot to digest there. But you know, in general we, uh, we, we continue to be positive on the dry ball market and uh, certainly it. Would be happy to go into that in a little deeper matter. Yeah, thanks, Johnna. That's a great rundown, lots of detail and you kind of beat me to some of my follow ups here, so let me see if I could make sure I still thread this needle right. You know, the two themes that I've noticed here today and stuff. I didn't want to dive a little bit more on our first of all, China. There's zero covid policy and specifically how that's impacting the market. So I guess that's kind of part one and you touched on it briefly. And in the other part I want to ask about it is the net impact of this crisis in Ukraine from the Russian invasion, because it seems like we could have a negative this summer this fall from the lack of grain exports, but at the same time we're seeing a lot of coal reroutings. So I guess first of all, can you talk a little bit about the China Zero covid policy and the impact of the area the secondly, what's the overall net impact from what's happened in Ukraine? Look on China, there's there's always a risk with China, right given the lack of predictability that would that anyone has on government policy. We would not have expected there's zero covid policy to last this long, particularly because of the economic targets they set in March um and ahead of the Twentie Party Congress which is taking place towards the end of this year. Having said that, the government definitely announced quite a few stimulus measures over the past two months, which is partially in response to the economic impact of the zero covid policies. And I think I think you have to keep in mind, you know, China is the largest dry bulk importer. The B D I and Chinese GDP growth have a high correlation. It's actually point seven percent. And and just to put that in perspective, I know we're all focused on a recession in the US, but the reality is the US core, you know, US G D P and the B D I correlation is zero Um. So while we have a lot of grain going out of the US, it is effectively recession proof in terms of dry ball trades. We do expect further accommodation in China the easing of economic policies. I think it's going to coincide very well with the seasonal ramp up and iron our cargoes that we tend to see in the second half. The second half iron our cargoes typically are higher uh than the first half, and and that dynamic, we think, will be very supportive of of Cape Rights going forward. And and you know, just looking at the F F A curve. You a while we're while we're, you...

...know, while we're around nineteen thousand twenty thousand dollars a day on the B D I. You know, the F F A curve is predicting thirty three thousand dollars a day for the second half of the year and, you know, a little more than twenty six thousand dollars on in the SUPERMAC sector. So we're still talking very good rates that generate very good cash flows, particularly when our cash fo break even rate is in the low eight thousand dollars a day. That's on China. You know, as we get into as we get into the into the Ukraine, Um, there's a few things that are that are going on. Um, with the ban on coal going into Europe from Russia, we're seeing Europe have the source for much longer distances. So we've had a net positive in terms of top miles. More coal has been coming from the United States, Columbia, Australia, South Africa going into the into the European Union. Um. And if we backdrop that with the grain trades and we talk a little bit about q three, you know, I think that's where the uncertainty lies. Um from a volume perspective, with Black Sea being peak season typically in July and August, I think it's fair to say that's unlikely to materialize. However, Um, we are seeing more ton miles come about that from from from the war in Ukraine. You're we're coming into a peak US grain season that will start August, September, October time frame. We've seen a lot more inventory draws coming out of the US and Brazil right now, again expanding ton miles Um. And then I think, you know, we've got to keep in perspective the third quarter does tend to be a softer grain experting period anyway. So the real strength will will come in the early part of the of the four quarter. But, you know, just summing up, what is what is unfortunately happening in the Ukraine. Um. It is forcing longer ton miles on the coal and energy trades and longer ton miles on the grain trades. Our view is the ton mile growth on the grain trades will make up for the lack of volumes that that are not going to be able to come out of the Black Sea this season. Thanks, John, no that that's a very helpful rundown of both of those are definitely adding a lot of color and that's been kind of a theme. We've hosted a few different driveball companies over the last couple of weeks and it's been the two themes are are really China's euro covid and how long that's gonna last. And then, of course, didn't impact of Ukraine, and it sounds like folks are saying similar things. So that's good at least. At least you'll all be in the boat together. Um. So, look, last time we talked to was in January and pretty optimistic on the driveball market and and you know, pointing to the new give it in policy, and that's panned out nicely. You've had two very decent payouts here to last couple of quarters. Do you see yourself as is similarly bullish, less bullish, more bullish? And know it's kind of hard maybe to compare and contrast exactly, but how do you feel now versus, you know, at the start of the year? Have things stand out like you thought they would or, if not, you know where if things been different? Well, as you know, we we've been bullish on the dry boat markets really since the end of second quarter. Um, what has materialized since then has definitely directionally been in line with our views, but candidly, great performance, I'll, performed our expectations overall. So you know, we'll clearly we're happy about that, Um and I think the last six months have continued to support our bullish view. I think it's fair to say that. And I'll go back to what I what I said before on Brazil. It is slower in terms of iron or exports going into China then what we would have predicted. So we're we're...

...a little off there, but in general I think rates have been above and beyond our our expectations. You know, the reality is we've seen a strong market for almost two years Um, and I think you know historically that's Um. That's been a challenge at least over the last ten to fifteen years Um, and the sustainability of that rally cycle is obviously huge for investor confidence as well as confidence for ourselves Um because, as I said before, we had a very challenging decade in the business. Um. I think that again it's all has to be put into context against the backdrop of the supply side. It is set up magnificently in the fact that we are in historically low order book. As I mentioned before, vessel speeds have slowed down because of a very high bunker price, the poor congestion, fleeting inefficiencies, and then we have the upcoming environmental regulations which will also keep the most likely in a in a slower band um in terms of in terms of speed. And what that means is um it creates greater inefficiencies in the fleet and and higher and firmer freight rates. Um Again, and I'll go back to the zero covid policy. You know that that's gone on a little longer than we expected Um in terms of the impact on rates. But we do believe the additional government stimulus we'll have a will have a very positive impact as we get into into the second half of the year. And just keep in mind at the beginning part of that we just haven't seen the real effect of that yet and that definitely lags Um from announcements. So if you look at the stimulus in the second half of the years, as long as as well as a normal seasonal drybug volume ramp up, I think things are positioned pretty well. Yeah, I mean, considering you know how reach and is in year to date and everything else. You know, I think that's a valid case to make, that that you know, we're still doing this good despite despite all that which has happened. So, yeah, thanks for the rundown there there, John, and it's clear that you are very bullish and your team is bullish. So at this point well, will pivot a little bit from the broad dry bulk market and we'll talk a little bit specifics about Jedco and capital location and what your shareholder turns program is gonna look like, right. Yeah, I do want to start off and ask about your your opex levels, because that's that's key to calculating, right, your cash break heavns and how much cash is available for distribution. We we saw a pretty significant increase over the past year, especially in q one of this year, and I'm just curious how much of that is, you know, permanent inflation, right where we're all talking about inflation. How much of that is labor inflation, costs parts inflation, and how much of that is more so like one off covid stuff for one off Ukraine type disruptions? Yeah, look, controlling cost it's been a it's been an industry right wide challenge. Um, the rising costs and inflation. It's not just being seen in shipping but obviously every sector globally. Uh, you know, at this stage, unfortunately, in terms of Jenko crew costs, you know they're the majority of our vessel opex Spence. So the budgeting for the first half of this year has been particularly challenging. Um, as a result of continuously shifting covid restrictions, inflationary pressures, rising gas prices, et CETERA. Um, we've experienced these co related challenges, particularly repatriating Chinese crew, and we do expect a portion of that to be temporary. Um as we've as we've cycled out of Chinese crew and most of our ships are now made up of Indian crews and Filipino crews. So there should be a normalization in the second half in terms of OPEX costs. And and I would...

...say you know, our budget went up for two thousand twenty two over two thousand twenty one, but in general we haven't changed our guidance over budget for two and what I mean by that is again I think we've seen most of the push in the first half with some normalization in the second half of the year. Big Picture though, you know, our our time charter equivalent growth is far out exceeded any increased on the on the cost side. So if you think about our TC, you know, having risen in thousands of dollars versus the OPEX rising in hundreds of dollars, you know, it's obvious as to why we're very focused on growth on the revenue side and doing everything we can to keep costs under control on the OPEC side. Yeah, I mean, I think what investors really want to hear is that, you know, those costs levels are kind of normalizing and maybe you can come it down a little bit in the back half of here and we're not going to just keep seeing quarter after quarter increases. Right. It sounds like the key one was it was pretty much I mean some of its inflation, right, but it sounds like the magnitude of that was kind of a one office. Is that fair? Look, yeah, so I think it did. Again, just to be a little more detailed, I think it's fair to say that Um in the second half of the year all of our most of our extraordinary crew changes will have been concluded, which is repatron, you know, repatriating our our Chinese crew. Okay, thanks John. And then on, I guess, on the positive side of things, and you alluded to it earlier, is the scrubber spreads right. I mean these scrubber spreads have gone ballistic. We had Singapore quotes of over five dollars a ton Um. Of course Jenko has scrubbers and all of the Cape Sizes. Is there any way to lock those freads in for those vessels or are you just kind of writing the spot market there and then, I guess. Secondly, with the scrub spreads this large and with their you know, a future scurve developing. I realized the future scarves backardated, but with the a market in the future, are you considering adding some scarvers for those midsized vessels at all? So, you know, in terms of locking in spreads, there's no doubt you could do it um but having said that, we we have we have felt that staying in the spot market, at least for the time being, produces better returns. So just to put some numbers, and you know, if you look at the spot rate of four ton versus the backwardation showing second half and only five and then subone six thereafter. Again, we think it's more important to capture the front end of the curve rather than locking in at something that maybe left some two hundred at this point. Um. And UH, most of the time in these in these fuel curves, you have this backwardation. So grabbing is as much as we can. On the economics right now, we feel is the best way forward. And keep in mind we fully paid off our scrubber investment. So every every dollar spread that we're taking in is pure return at this at this point. So I think it allows us to be more aggressive on our fuel spread approach. Then maybe we would be if if we're still paying back that investment. Um, I think in terms of new scrubbers. Yeah, you know, obviously the current Singapore spread being so wide is a great thing for us. Um, it's hard, hard for me to to expect that this will last for years on end Um to justify large scale investments. And there's a few things that I think you have to take into account. The most important one is you gotta you have to take a ship out of service in today's pretty firm market, which carries a pretty significant opportunity costs. And you know, dry dockings in China are taking longer than they have in the path. So that can actually start to add up quite a...

...bit and and adds to your payback time on that. So I think that's a that's an obstacle. We do still believe in a portfolio approach. We like the fact that we only put scrubbers on our capes. That's where you get, you know, the biggest bang for your buck, because those ships are consuming the most amount of fuel there at see the longest period of time. And again we've we've installed those on every one of our capes and that scrubber investment is paid off. So even if the spread went down to a hundred hours ton again, we're still making thousands of dollars a day or over and above Um what we would if we were burning low self for fuel oil and did not have the scrubbers on board. So that that's a longer answer, but the short answer is, you know, not at this point. Um, we're we're very happy with the investment we've made. It's earning a very nice return and for the time being that's where we're gonna we're going to concentrate on. Yeah, thanks John. Yeah, I think it makes sense. I mean it's hard to lock in a curve that's so massively backwardated, especially if you're sort of somewhat bullish. Well, I mean even if you, I guess, even if you don't really have a firm view on the spread, you just see something that crashes so hard on the forward curve and it just, you know, logically, might make sense to ride that. Um, as far as installing the scrubbers just on the Capes, you know, at the time, I think absolutely right. That was the right decision. mathematically made sense. I mean, obviously, with the benefit of hindsight, John, I'm pretty sure you would have wanted to install scrubbers on the entire fleet. But Um, I do admire the fact that you're not, you know, chasing it afterwards, right. I mean I think right now what you're doing it makes makes total sense. Um. So yeah, I mean I think, as you said, you already paid off the program and in two years, so that's that's pretty good. Um, what about best acquisitions or or any sort of fleet renewal? Does any any second hand type acquisition makes sense at this point? Look, you know, are about value strategy well, and as well as our capital structures, so that that in itself gives us a lot of play ability to continue to grow Um along with the leveraging and high dividends and keeping that on a parallel path, uh, similar to what we did in two thousand twenty one and to date of this year. In terms of individual acquisitions, we do still view rate from the minor bulk ships as a head of values so that they continue to to put up strong cash on cash returns buying ships today, second hand ships today. So that's something that we can continue to focus on. In terms of modern, fuel efficient tonnage, we did a lot of fleet renewal last year, uh, and and I think we will probably do continue to do some of that this year in an opportunistic basis. And then on in terms of you know, in terms of what that can spin off, is obviously an accreation on the dividend side, and that's that's the most important thing for us, is making sure that, whatever acquisition we do, that we continue to, you show, a greater ability to pay larger dividends from an accretion standpoint. Yeah, I think I think that makes sense. And the only other thing we've because we talked about the scrubbers and how they're helping the cash flow. We're talked about, though, pex and how that's trending Um. And the only the question that it would really fit into that calculus of of the dividends, I mean besides the obvious, which is the market rates. But besides that one is how much additional debt repayment do you plan to do at this point? I mean I know you've kind of mentioned this aspirational goal of having maybe zero net a debt or maybe even negative net debt. At this point. Your lefeverhage is pretty low, though, right. I mean you're basically in the teens in percentages, maybe even closer. Are Are we done, you know, paying back for the next year or two, or do you think there might be something else John? So we're we're down to about a net debt, uh twelve percent on a on a value standpoint, in of...

...the of the fleet Um as as I as I think you know, we are continuing to target voluntary debt repayments of thirty five million dollars for two, which works out to about eight point seven five million dollars per quarter Um. So so there is still a little more debt that we're gonna voluntarily repay or prepay Um, and I and I emphasize that, because we we've paid down so much depth that we have, um, we have zero amateurization, do uh for the next several years at this point. Um and, I think we've paid off maybe fifty five, fifty six percent of our debt in the last eighteen months, which is obviously huge and it's incredible to see that are you know, the scrap value of our fleet is more than two times a debt of our our debt outstanding today. Um and and, as I said, but where we had, we do have a goal net that zero, which we think will occur by the end of two thousand twenty three at this point. Yeah, thanks for the clarity on that, John. I just I mean I get the long term goal, I suppose. I am a little curious, you know, at leverage, which is exactly we have on our analytics as well. Um, you know you're doing the eight point five million kind of extra right per quarter. Um, the stock. I mean, I guess it depends on the marketing conditions, right, but I mean the market has been pretty choppy at the stock market at least the last couple of weeks, and you're training now a pretty decent discount to net asset value. And who knows, I mean with your earnings going up, that discount might widen even further. So, Um, is there any appetite to just, you know, I don't know, pause the deleveraging and maybe just some repurchases? Or is that net at zero really a hard target? The mets at zero is something that is important for us to get to. You know, obviously you could toggle between dividends and share buy backs. Um, I I still maintain that if you're going to do share by backs, it has to be in a in a pretty large manner to move the needle on that absent value. And since we really just had our first full payout dividend in q one, we do want to stick to this dividend formula Um and and allow the allow that dividend to be seasoned over the next three quarters or so and we think that will dry valuation more so than stock buybacks at this point. But I'm not going to take it off the table. It's why we have established our reserve Um that we that we put into place each quarter. You know, that reserve can be used for a wide variety of things, including share by backs, and if that's something that makes sense, then well then we'll definitely do it. But again, we, we, we do think these valuations, the valuations for us, should improve. It should get much more so to cast flow yield and divodend yield. And we just tink it takes a few quarters. We've gone back and looked historically at what Jenko went through in the o five, the sort of Oh seven time period when it went public, and it took it took three to four quarters before it that dividend. You'll pushed down into the into the single digits, and I think that will well, it should occur this time around. Um, even with all the noise that is, uh, noise was probably a light term with with all the with everything that is going on in the in the equity market today. Hopefully we can we can overcome that. Yeah, thanks, John, and I appreciate your your time and your patients. And I'M gonna push a little bit harder on this question just because I want to logic a little bit Um my concern, or at least I guess where I have some. I guess I'm a skeptic. So look, I see the point. I see the argument to make, especially towards a retail investor that look, this company has no debt, there's no big risk, we're gonna pay out...

...big dividends with this cash flow when the market is good. Um. But how do you justify that on like a like a weighted average cost of capital basis? Right, I mean because if you have a decent fleet, you can get, and we're not talking huge leverage, right, even get thirty five leverage at extremely favorable terms, right, and that enables you, with that low cost leverage, to earn a higher return on your equity over the cycle. I mean, what, what's the thought process on that, John, is it? Is it that you can actually earn a higher return on equity with no debt, or or what's kind of the logic? Yeah, the whole idea is to trade out a significant premium to n a V and I think the only way you can do that on a long term basis is to not have a lot of financial leverage. So, you know, we think that we've created the best balance in terms of a risk reward model, um, with the low cash flow break even, which, you know, not only protects you in downside scenarios but it allows you to pay higher dividends Um going forward. So without having to repay debt and that interest going in the break even right. So so that's a big part of it and you know, Jay I, I would I would remind you all these things in the academic discussions of great on paper in terms of weight that average cost the capital, but the reality is when when this industry experiences the downturn, dividends get shut off. We don't ever want to turn this dividend off. That is one of the very key things to uh to this dividend policy is not ever having to be able to turn it off because of the low castle break even and the low financial leverage. And and let's also be frank, a lot of these companies in down markets went and did rescue equity and that is very expensive. So if you look at long term cost the capital, we think this is absolutely the best model to never again have to go back to the market on a rescue basis and always continue to pay a dividend, so that you know, investors that a bod our stock basis a dividend don't don't have to make the decision while I'm not getting a dividend anymore, so I need to get out. Well, it certainly looks like we went from you know, in the marketing, the drive boall market. And I'm a younger guy, but I've I've been following the industry now, making myself not old, but I've been following the industry fourteen, fifteen years. And you know, it seems like we went from one end of the absolute extreme, which was massive leverage, unsustainable, fixed and it wasn't even variable dividends, they were like fixed dividends, and you know, that ended in tears and disaster, right, and now we're at the opposite of the spectrum, which is loaded note. And you're not. I mean you're doing a great job. I'm not trying to take any away from you, but you know, there's lots of companies that are starting to try to do a similar thing, which is very low debt, very high pay out, very right, which I which I applaud the variable part, because at least that's tied to something that's sustainable on a variable formula, because fixed is not right. I mean fix is just based on you know, unless you say we agree. Okay, so I've a lot all that, John. I guess trading above now would be great. I mean I would I would love to see it, you'd be like the you'd be like then, of drive ball. But it doesn't. It rely upon I'm trying to phrase this correct way and without being offensive, but doesn't rely upon like a retail very uninformed, very ignorant retail investor who is valuing a drive ball company based on the dividend yield. Like, I don't want to vacue into a corner, but like, how do you get yourself over with that metric? Well, so what? Why? Why? I guess the question is, why should a shipping stock trade purely on that acid value? And and I think what you know, why shouldn't these companies, like a lot of other companies, trade on cash flow yield or an enterprise value, even top which you know we we if you go back and you look in the past, a lot of these companies, you know, mid cycle, traded in the in the five to six times and right...

...now we're, you know, maybe around three point five Um and that that seems very undervalued at this point. So I I'm not quite sure why. You know, N A V in some cases is the benchmark. To me, it's more about Castro yield, just like any other UM company. So I I don't think you know. I think we are more focused on investors that appreciate dividends and want dividends in their portfolio, Um, and I think that's a pretty important thing, particularly now, you know, with what's happening in the stock market and and too, inflationary pressures, which we all know. Shipping is, in general, the right place to be in an in an inflationary market. Well, I do want to get to an agreement, John. So one thing I will agree with you and I think I can. I got to get to guess. But one thing I think we both agree on is that getting if you can to get your stock that created a strong Cremington, you know, then you're in the circumstance. Then you're in the cat bird seat where you can literally create professional value. Right. You can grow the company by acquiring assets on the market, Um, you can issue stock a creatively, you can do ships for shares, a creatively, Um, and you can actually grow the company Um perpetually. So I mean, I agree, if you get there, it's a beautiful thing. J I on'm so I'm with you on that and I would tell you that we are a very patient management team. Last year, when our peers turned on the dividend tap and in a in a very high way. You know, three quarters before we did. We stuck to our plan. We paid down the debt to the target that we wanted to get to last year and that took a lot of patients and discipline. And now we are set up with this very low cash flow break even low financial level, you know, to to pay out manageable and sustainable dividends. Yeah, were a little bit of patient, a little bit, a little bit of patients. I think the valuation will come. Yeah. Well, well, we'll wish for the best. It would be healthy for the sector to have a company trade at strong valuations. I think it. It is tough for the drive bulk sector when every company is simply comps to each other and it gets really circular really fast and and there's a lot of I don't know if I agree that their arbitrary, but there's definitely a lot of ceilings to their current valuation environment. So if you know one or two companies can break out to the upside, you know that's healthy. I am I'm not. I'm certainly not opposed to that. My only final caveat, John, and I'm sure you agree, with me at the end of the day. But if you're trading at a big discount and NA, the opposite is true, right. You can increte value and you can create perpetual value by repurchasing shares. So I mean it's I guess your goal is that you just never have to have that question, right because you never trade. There is that is that may be fair. I think that's fair. And again, we we want to give this dividend strategy, which has taken us, you know, more than a year to get to Um we we want to have that play out, get seasoned in them. What the will assess where we are. Yeah, I mean, that's all you can do is do your best and then the sess. So anyways, John, thanks for putting up with my my probeing on that, on that policy, definitely a skepticist. It's a it's a they're good questions. It's an interesting conversation and, like I said, that the management team has has a lot of patients to get where it's where it thinks it can where it things it can go. Yeah, certainly, John. So last sort of industry question and then I'll give you the closing word on on Gento. But let's I want. I got to ask about the new builds. I mean I've been asking basically everyone on here. It's a very interesting dynamic, right. Steal prices are up, timelines are pushed out. What's the new build Environ it looked like, for for the dry boak market like? What's...

...the sort of, I guess, price versus normal? What's the sort of timeline? And and do the economics of a new building make any sort of sense? Yeah, so, as I as I mentioned earlier in our conversation, the UH, you know, the order book is at a historical love so it's just a fantastic backdrop for for dry boat shipping, at least for the next few years, with that visibility. So you're really looking at delivery schedules now, maybe at the end of two thousand twenty four, but much more likely in two thousand. And Uh, you know I I always thank my container ship owners friends, uh, in terms of having soaked up that yard capacity. So so that's been really good. Um, I think in general, Um, you know we well, not even in general. Very direct you know, we're we're not going to be ordering any conventional fueled ships. In terms of new bill we would much rather buy second hand vessels and get immediately strong cash flows off of those. And you know, our view is that the equity markets want cash flows today versus many years out. You know, particularly given the rising interest rate environment and lower value those full of cash flowers may have several years down the road. So we want to put the money to use right away, get those cash on cash returns and De risk the purchase. But just from a fundamental standpoint, we don't think prices are actually incentivizing right now for ordering. If you look at the kate new bill price, it's basically in parody with with resale prices. And even for that math to start to make sense you've got to have resale prices significantly higher than uh than new builds Um in order to incentivize people to order, and we're just not doing that today. So that that's actually a very positive thing. In terms of other issues, you have the environmental regulations and we're sing emissions Um and the alternative fuels that come along with that. So there's just a lot of questions around useful life of ordering conventional field ships today versus you know, ships of the future, which will most likely be burning ammonia or hydrogen or other uh, you know, even even renewables down the road. So I you know that that's sort of a again, it's a detailed view, but you know that. That's why we're pretty positive in terms of that feeling being in place Um, for dryball ordering at this point, at least for the next few years. Yeah, well, we'll hope the order book stays low. I agree with you that that current numbers are excellent and I also agree with you that the economics of ordering new bills at this point it doesn't really make sense. So hopefully we'll continue to see that standoff and we'll see that order book get even smaller. Yet I would love to see an order book of pretty much near Zero. I don't know if that's possible, but the lower the better. So fingers crossed. Well now, C J, we we definitely agree on something an I think we'd find something. John. No, it's been good. We really really appreciate you, John, so I'll give you the last word. Look, there's lots of driveball companies. I think you've hinted at some stuff that Jenko is doing different. But why should investors pick Jenko, G and K Today and what differentiates you from your peers and why is this the place to be? I'll go back to I'll go back to the value strategy that we put in place and the dividend. And you know, everyone can pay a dividend in the twenty market. Um. But you know, we think we offer the best risk of war balance because of our low financial leverage, the low cash flow brick even rate, creating the highest dividend potential and a sustainable dividend across all cycles. And I'll go back to the key is not having to turn it off and we think we've set that untele up. Um. And you can also argue that...

...in a softer market, which we you know, we don't see coming anytime soon. But in a software market, you know, dividends can actually be even more valuable because investors get paid to weight for the next up turn. But we think that's actually Um. You know, we we don't see that coming anytime soon. So the combination of that low financial leverage the high operating leverage that we have bembedded in our actual fleet, that's what creates that risk reward balance and and the financial model that that we've set up. Um. The only thing I would tell you is this model that Jenko has put into place and it hasn't been accomplished at this scale and dry ball shipping in the public markets at all. You know, twelve percent net learned to value, strong liquidity position, two seventy million dollars, as in mark, thirty one, which, by the way, is about our market CAPP interestingly enough, we do have scale with forty four ships, the operating leverage of the larger ships the Cape Size sector, and we talked earlier about the more steady minor bulk ships. So it allows us to play offense in every single market Um, which again is very important because that's how values created. And so on top of all this, and to summing up, you know we're a very highly transparent company. We're one of only two U S filers Um in our peer group, very high corporate governance standards. In fact, we were rated number one UM E. S G in terms of public shipping companies, out of fifty four companies. So you know. I our our view is that, while it's taken some time, the better part of a year, we now have ourselves set up to execute very well under the value strategy and we saw the first full payouts of it in the in the first quarter and we're looking forward to the rest of the year. That's certainly John will wishing you the best of lunch and we're definitely both watching the drive boak markets together and hoping things stabilize open, that China gets their reopening act together and uh, next time we talk, hopefully we're celebrating even better times. That's great, Jay, it was. It's always good talking to you. You take care of yourself and thanks for the time. Fantastic. Have a good efvenion, John. This includes another iteration of value investors. Edguly, we just hosted Geno Shipping CEO, John Woven Smith. Jenko trades on the U S Dockors Change Docks and will g n K. nothing on the call today constituted official company guidance or investment recommendations of any form. I currently have no position in Gento. However, this is being recorded on the afternoon of June two twenty two, so if you're listening to recording at a later date, these positions may have changed.

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