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Hawk’s Nest

Unusual Call Buying in Dry Bulk Shipper Navios (NMM)

by | May 26, 2021

Navios Maritime (NMM) with unusual activity on 5/26 as 1,100 July $25 calls were bought aggressively at $3.40 to $3.80 offers and the $22.50 puts sold to open 1,370X. NMM does not see a lot of activity and shares pulled back to retest the flag breakout from April while putting in a strong bullish reversal candle off support. NMM shares have gained 145% YTD and 285% over the past six months as shipping stocks have made a big comeback. Navios is an international owner and operator of dry cargo vessels engaged in the seaborne transportation services of a wide range of dry cargo commodities including iron ore, coal, grain and fertilizer and also containers, chartering its vessels generally under medium to long-term charters. Navios Partners’ fleet consists of 27 Panamax vessels, 18 Capesize vessels, four Ultra-Handymax vessels and seven Containerships, including two Panamax bareboat charter-in vessels which are expected to be delivered by the first half of 2021; three Capesize bareboat charter-in vessels which are expected to be delivered by the second half of 2022; two Panamax vessels acquired on March 30, 2021 and one Panamax vessel expected to be delivered by the second half of 2022, excluding one Capesize bareboat charter-in vessel which is expected to be delivered by the first half of 2023. NMM has a market cap of $620M and trades 4.1X EBITDA with EBITDA seen rising 164% in 2021. On its latest earnings call Navios management noted the global GDP growth environment and is optimistic about demand for dry bulk and dry vessels throughout 2021. NMM is positioned to capture the increasing charter rate as about 40% all of available days are either open or index linked, and it operates with a strong balance sheet and low leverage. Demand is forecast to outpace net fleet growth in both ’21 and ’22. The recent rapid market recovery has caused extremely high demand for available tonnage, which is in short supply across all segments. In particular, the extremely tight availability of Panamaxes, combined with port congestion, increase in trade and lack of newbuildings has propelled periods of time charter rates to hit 16-year highs of 43.5% — dollars per day for periods up to a year. Navios also acquired the remaining units of Navios Maritime Containers earlier this year creating additional scale and diversification.