Summary

Dry-bulk shipping demand is rising and expected to exceed fleet growth which will result in increasing shipping rates – good for CTRM
CTRM raised capital (share issuances and debt finance) and acquired a number of new dry bulk vessels to their fleet
With upcoming delivery of vessels and increasing shipping rates CTRM is well positioned to take advantage of improving market conditions

Market Overview and CTRM Vessel Acquisitions

Demand will surpass fleet growth in 2021 and 2022

Quote from a reputable data-driven shipping company “we firmly believe that 2021 and 2022 will deliver demand growth that exceeds the fleet growth. This will increase freight rates. While we do believe that higher freight will trigger more newbuild orders we expect supply growth to trail demand growth in the coming 5 years due to the uncertainty around the choice of fuel and propulsion systems”

Article here

Article discussing shipping costs to rise in 2021 here

CTRM has more vessels and Dry Bulk shipping rates are rising.

The Baltic Dry Index is reported daily by the Baltic Exchange in London. The index provides a benchmark for the price of moving the major raw materials by sea. Link here

CTRM has added a number of new carriers to their fleet. This is a good sign, and as they start to take delivery of these vessels they will be able to take advantage of higher sipping rates and sign profitable charter agreements. I calculated the potential revenue based on Dry Bulk Charter rates today and estimated the number of days each vessel would be chartered for. Both of these calculations are quick estimates of potential revenue for CTRM.

For reference if you can earn about $6M/year with a Kamsarmax the payback period is about 2.5 ~ 3 years. This is seen from the price recently paid for these vessels.

	# of Ships	Rate Per Day	Days Chartered (Low Case)	Revenue (Low Case)	Days Chartered (Ideal Case)	Revenue (Ideal Case)
Capesize	1	$20,750	200	$4,150,000	300	$6,225,000
Kamsarmax	4	$19,500	200	$15,600,000	300	$23,400,000
Panamax	6	$19,500	200	$23,400,000	300	$35,100,000
			Total	$43,150,000	Total	$64,725,000

Breakdown of CTRM’s current vessels – total capacity of 1.2 million dwt

1 Capesize
4 Kamsarmax
6 Panamax
2 Aframax tankers (not included in the calculations)

Cargo Ship info here

Link to rates here

A summary of recent vessel acquisitions by CTRM

March 10, 2021 – Vessel Acquisition – Kamsarmax $15.45M Link here
March 3, 2021 – Delivery of Kamsarmax and signed charter agreement which will generate a revenue of $2.8M minimum and up to $4.2M link here
Feb 3, 2021 – Vessel Acquisition – Kamsarmax for $14.5M link here
Feb 1, 2021 – Vessel Acquisition – Kamsarmax for $15.85M link here
Jan 10, 2021 – Vessel Acquisition – Capesize for $17.5M link here

The total cost for Castor to acquire these vessels was ~$63 million. This is significant and leads me to my next point – they needed to raise money to acquire these vessels.

Recent Financing Activities

Jan 22, 2021 - $15M in debt financing link here
Jan 8, 2021 – Raised $26m – 137M shares at $0.19 link here
Dec 31, 201 – Raised $18M – 98M shares at $0.19 link here

Over the last 3 months CTRM has access to $49M – this was and will likely be used to pay for vessel acquisitions

Institutional Ownership - Large Holder and Recent Buying Are Good Signs

Link here

Typically, it is a good assign if institutes are holding a decent number of shares. The table below shows institutes hold a decent number of shares in CTRM.

This next tables shows that institutes have been buying CTRM (and significant amounts) over the last few weeks, whioch is another great sign. If they didn’t believe in potential upside they would have been selling their position in CTRM

Risks

Debt to Equity: CTRM is sitting at a D/E ratio of 35.3% which is considered high.
Price to Book: CTRM is overvalued based on its PB Ratio 2.4x compared to the US Shipping industry average 0.9x. P/B ratios under 1 are typically considered solid investments. This is important because CTRM is a shipping company so it’s vessels are assets and make up a large portion of the company’s book value
Shareholder Dilution – over the last year CTRM shareholders have been significantly diluted, that being said the recent acquisitions of vessels which will generate revenue and cash flow do look promising

Summary

TLDR: Financing through share issuance hasn’t been great for CTRM, however they used this cash to acquire a number of vessels and increase their fleet. With demand in dry-bulk shipping increasing CTRM is well positioned to take advantage of higher shipping rates. Intuitional investors are also staring to buy into CTRM – typically a good sign.