This Newcomer Shipping Stock Will Take Off

The Oceanaut fleet will consist of two Capesize, four Panamax and three Supramax dry-bulk carriers. The larger two types of ships will carry so-called "major bulks," or coal, iron ore and grains, while the smaller Supramaxes will carry the "minor bulks," or aluminum, fertilizer, sugar and scrap metals.

Two of the Supramax ships are due for delivery next year, while the third Supramax and the two Capesize ships are due to be delivered in 2009. This is a nice variety of ships, which will allow Oceanaut to take a wide variety of commodity assignments.

Georgakis said the thinking behind Oceanaut was to diversify away from EXM's dependence on the spot market by putting the nine new ships out on medium- and long-term charters of two to five years, maximizing visibility on the cash flow and ultimately paying a dividend . Georgakis said that he would also opportunistically buy more ships, permitting shareholders to enjoy the best of both worlds -- dividend yield and capital appreciation.

Georgakis said that he will announce charters for Oceanaut's ships in the next month, so we'll soon get a better view of the company's profitability. The new Capesize ships due in 2009 will not get rates that are comparable with current levels because you have to make concessions on price in order to book them forward. "We have been wise, I think, to lock in the benefit of what we think are very good rates for the vessels," he said, apologizing for what will be perceived as a discount.

So, how will Excel and Oceanaut differ?

Excel has a 17-vessel fleet with an average age of 14 years and pays a modest dividend. Oceanaut will start with a smaller fleet with an average age of seven years and will pay a larger dividend. Oceanaut's technical management will be handled by a unit of EXM, while its chartering assignments will be handled by a unit related to the Restis family.

Once the company is under way, Georgakis said that he will resign from his role as chief executive of Oceanaut and help the company's board hire a new management team, while retaining a 1% share of the firm.

In conclusion, I think that marine shipping will maintain its cost edge over other forms of transportation and even improve, as iron ore and coal shipments to China and India increase. I also believe that the industry will not be oversupplied with new boats until 2009, so that makes Oceanaut a good if risky buy right here.

I realize that there's not a lot more to go on other than a bet that Christopher Georgakis and the Restis family can build another successful dry-bulk freighter company from scratch, but it's a bet worth taking if you're into this sort of thing. After the new charters are announced I will provide a price target, but figure it will be over $12.50.

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