Belships’ bulk carriers are calling in the Black Sea as normal, but conflict in Ukraine would be negative for trade, according to the shipowner’s chief executive. Lars Christian Skarsgard told TradeWinds he hopes for “a peaceful and amicable solution” to the crisis in Ukraine. “As a starting point, I find that it’s a negative factor because it’s a potential hindrance for free trade and dry bulk is, above all, a market that nurtures and feeds off free trade,” he said. “It’s difficult to gauge the short-term effects, but in general it’s a negative. However, we have seen before that conflicts like this are not necessarily fought on the ground; they’re often fought with economic sanctions and trade restrictions.”

Belships’ supramax and ultramax vessels trade a lot of steel and grain cargoes out of the Black Sea. “Russia and Ukraine are significant exporters of grain and steel, so we are very active there and it’s an important market and segment for us,” Skarsgard said. Belships is conducting “business as usual” in the region for the time being. “We have ships, as we speak, loading in Ukraine and Russia. If anything, the weather now is the main challenge,” he said. “We don’t have long-term cargo contracts, so it doesn’t pose a big threat for Belships, but it’s a very important market.”

Belships has just reported another record-high quarterly profit and plans to share the wealth with its shareholders in an extraordinary dividend this year. Now the company is making a “subtle change of tack”, Skarsgard said. “The last three years, we’ve been on an all-out growth strategy expansion plan. Last spring, we announced the dividend policy, [and] we still managed to expand the company last year,” he said. “We’re going to be much more selective and conservative going forward, protecting the dividend capacity. We’ve been really active on period charter coverage, effectively de-risking our earnings for this year and even for next year already.”

Belships has already covered all its costs for this year and has contract coverage for almost two-thirds of its fleet in 2022. A few bulkers will have their period contracts up for renewal each quarter going forward, so the firm will continue to be active in the period market, Skarsgard said.

Belships has refinanced a $116m loan and has completed three sale-and-leaseback deals so far this year — another part of this “conservative” strategy. The deals secure up to 10 years of financed fixed-rate leases from Japan. Belships just has one lease left to secure for its remaining newbuilding, after which its entire fleet will be fully financed. Belships has become something of the equity analyst’s darling. Its Oslo-listed stock is Pareto’s top dry bulk pick and is top rated by Arctic Securities and Fearnley Securities. But Skarsgard still thinks Belships’ shares are undervalued, based on its cash flows and forward bookings. “If you look at the stock today, there’s basically a price-over-earnings [ratio] of around three. When you have contract coverage for 65% of 2022, I think that’s way too cheap — and the dividend yield returns are extremely high,” he explained. But shares are undervalued in any company that has modern bulkers, simply because asset prices are below where they should be, Skarsgard added. “If you look at dry bulk, the value of a modern ship in relation to whatever you get for a one-year period contract is very closely linked. The correlation is 95%+ and this goes back to the 1970s,” he explained. “Today, you have a one-year time-charter rate for an ultramax close to $30,000 [per day] and it’s been above $20,000 for more than a year. If you look historically at what that should point towards in the value of a five-year-old vessel, it’s obvious that those modern secondhand ships are undervalued.”

Five-year-old Japanese ultramaxes are currently valued at between $30m and $33m, but Skarsgard thinks this is still too low. “My opinion is that modern Japanese ultramaxes, five years old, should actually be worth more or at least the same as the cost of a newbuilding — and the cost of a newbuilding in Japan at the moment is $36m for delivery in the second half 2024.” Skarsgard said the disparity in the values of older vessels and brand-new modern ships began to widen “quite significantly” in January and February. He thinks this trend will continue in 2022.