Star Bulk Carriers ( SBLK)

Q3 2010 Earnings Call

November 18, 2010, 8:30 a.m. ET

Executives

Akis Tsirigakis - Chairman and CEO

George Syllantavos - CFO

Analysts

Noah Parquette - Cantor Fitzgerald

Mike Rindos - Rodman & Renshaw

Doug Garber - FBR Capital Markets

John Cruise - Adirondack Asset Management

Presentation

Operator

Welcome to the Star Bulk conference call on the third quarter 2010 financial results. We have with us Mr. Akis Tsirigakis, chairman and chief executive officer, and Mr. George Syllantavos, chief financial officer of the company. [Operator Instructions.]

We now pass the floor to one of your speakers today, Mr. Akis Tsirigakis. Please go ahead sir.

Akis Tsirigakis

Good morning ladies and gentlemen, and welcome to the Star Bulk Carriers conference call to discuss our third quarter and nine months ended September 30, 2010 financial results. I am Akis Tsirigakis, the chief executive officer of Star Bulk Carriers, and with me today is George Syllantavos, our chief financial officer.

Please be reminded that we publically released our financial results last night, November 17, after the market closed in New York, where it is available to download, along with today's presentation, on the Star Bulk Carriers website, which is www.starbulk.com. If you do not have a copy of the press release or presentation, you may contact Capital Link, our investor relations advisor, at 212-661-7566 and they will be happy to fax or email a copy to you. This conference is also being webcast, and it is user controlled and can be accessed through Star Bulk's website.

Before we begin, I kindly ask you to take a moment to read the Safe Harbor statement on slide number 2 of the presentation.

While you do that, and before we commence the earnings presentation, I would like to take the time and use this introduction to make a few brief points about Star Bulk. Star Bulk remains financially strong, with modest leverage, substantial charter coverage, ample liquidity, positive cash flows, and pays meaningful dividends. We have an excellent relationship with our lenders, and we are one of the first companies that met its original loan covenants.

The reduction of our operating cost campaign continues to show tangible results quarter after quarter. These reductions have been achieved while the quality of our operation was enhanced, and our utilization rate has substantially increased. Here I should mention that this quarter's G&A increase has a one-off expense related to professional fees.

We have been successful leveraging management's experience in the shipping industry over the past two years as the company has been able to meet the challenges in both the credit and dry bulk market and produce results that have strengthened the company.

Apart from operating expenses reduction, highlights over the past two years include our Capesize new building, both of them actually, which were contracted at the lowest price levels prevalent since 2004, expanded and renewed our fleet through the sale of two of our oldest vessels, and the acquisition of three modern Capesize vessels. All of these were achieved without diluting our shareholders.

Also, we repaid organically a major portion of our debt. We have been in full compliance with our original loan covenants. We have monetized a substantial portion of our commercial claims, and the in house management continues to produce impressive results. Finally, we are also pleased to declare our six consecutive quarterly dividend for the third quarter of 2010 of $0.05 per share.

Please turn to slide number 3 of the presentation to discuss some important financial data. On this slide, we present certain key data to illustrate why we continue to believe that while Star Bulk continues to enjoy a very comfortable financial position, it remains substantially undervalued. As of November 17, 2010, our minimum total contracted revenue is $200 million, and our market capitalization stands at $184 million. We estimate the charter free value of our fleet to be about $390 million, and the charter adjusted value to be about $420 million.

These estimates include the downpayments for the two new building Capes, [House Numbers] 63 and 64. Our senior debt currently stands at about $210 million, and our current cash position is approximately $41 million. According to the above, the company's net asset value, or NAV as we call it, amounts to $251 million or $4.03 per share based on our charter adjusted fleet valuation. Based on a share price of $2.96 at yesterday's close, our price to NAV ratio stands at 73%, indicating plenty of room for price appreciation from the current, heavily discounted levels.

I would like to reiterate that we have resisted exposure to interest rate swaps and have therefore taken the full benefit of the prevailing low interest rates. I should point out that after having paid $43 million of the first two installments of the two new building Capesize vessels, and $63 million to our banks in principal repayment, Star Bulk has managed to grow organically while significantly reducing its leverage.

The company currently maintains a net debt to total asset ratio of 24%, which is considered conservative. Going forward, the remaining principal repayment for 2010 is $5 million, out of a total of $68 million for the year. Principal repayment for 2011 goes down to $35 million.

Please turn to slide 4 to discuss our third quarter and nine months ended September 30, 2010 financial highlights. For the third quarter of 2010, gross revenue amounted to $29.9 million and net income amounted to $1.2 million. Excluding non-cash items, our net income for the third quarter 2010 amounted to $3.7 million.

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