Red Sea Dramas Highlight Marine Awareness Stocks

In a report issued by Liberum Capital last Friday, their analyst Gerald Khoo stated that:

“The rising number of attacks on shipping in the Red Sea, although mostly unsuccessful, has resulted in many ships being diverted.

The alternative routing via the Cape of Good Hope results in delays and additional costs, with the latter evident in a spike in container rates (more than double over the past three months in some cases).

However, excess capacity in the container shipping market should mitigate the impact and we see limited prospects for this impacting inflation at the economy level.”

The analyst headlines his piece as ‘Red Sea attacks – manageable impact on shipping’ – well I disagree!

It is becoming apparent that Iran, purportedly the funders of the Yemen-based rebels, is losing control of the Houthis – which could spell out even greater potential for conflict on the seas.

In that report Liberum rated the shares of the £1.06bn capitalised shipbrokers Clarkson (LON:CKN) as being a Buy @ 3445p, with a Price Objective of 5100p.

Master Investor subscribers will already know that my shipping services sector favourite stock is the much smaller £99m valued Braemar (LON:BMS), currently 298p, it is favoured by analyst Ian McInally at Cavendish Capital with a 385p Price Objective, which in my view is conservative.

Note that recently another global shipbroking group, Lightship Chartering, has been buying into its equity and rates the BMS shares as being cheaply rated.

But there are other players in the marine sector that will, undoubtedly, see benefit of the conflict across the world’s oceans such as SRT Marine Systems (LON:SRT) and Windward (LON:WNWD).

SRT Marine Systems (LON:SRT) – Live Webcast Due This Thursday At 8am *

Just before Christmas this cracking little company announced a £10m Placing and Subscription, as well as offering Retail Investors the opportunity to buy some cheap stock at 35p a share.

The interesting fact about the Subscription was that £7m was being invested by Ocean Infinity, a global leader in marine robotic technology used to gather data from the world’s oceans, in buying 19,026,000 new SRT shares.

The balance £3m, for 8,571,576 new shares, was Placed with professional investors, while £0.5m of the Retail Offer went to SRT investors who applied for stock.

That gives Ocean Infinity an equity stake of 8.98% in SRT.

The coming together of the new investor and SRT could well turn out to be ‘a marriage made in heaven’ because both companies have similar fields of skills and opportunities for growth.

SRT develops and provides integrated maritime surveillance, monitoring, management and safety systems used by coast guards, fishery authorities, infrastructure and vessel owners for the purposes of managing and controlling their maritime domain.

Its applications include security, safety, search & rescue, law enforcement, fisheries management, illegal fishing detection and environment monitoring.

The net proceeds of the Fundraising are expected to fund working capital to strengthen the group’s balance sheet and facilitate the growth of both the surveillance systems and navigation transceivers businesses.

The group is expected to see its turnover for the year to end March to rise 133% to £70.9m (£30.4m), turning the previous £0.3m loss into an adjusted pre-tax profit of £7.2m, worth 3.6p (-0.3p) per share in earnings.

For the coming year estimates are out for £104.8m revenues, £11.8m profits and 5.2p per share in earnings.

The shares closed on Friday night at just 41.50p, at which level they are incredibly attractive.

I stick very firmly to my Target Price of 60p for the group in 2024.

*The group is presenting a special webcast this Thursday morning at 8am – one certainly not to be missed.

In your web browser go tohttps://srt-marine.com/about/investors/and scroll down the page to the “JOIN US FOR OUR NEXT INVESTOR WEBCAST” section.

(Profile 14.09.20 @ 39.5p set a Target Price of 50p*)

(Profile 10.11.23 @ 39.75p set a Target Price of 60p)

Windward (LON:WNWD) – Shares Trebled In Last Nine months and still cheap

This group saw its shares explode on Friday, following a Trading Update for its 2023 financial year to end-December.

They rose from 88.50p on Wednesday night to touch 115p on Friday before closing at 110p.

The company is an AI-based risk management SaaS platform for the global shipping, energy and related maritime logistics and trade finance ecosystems.

Its software allows customers to monitor, assess & predict trade vessel compliance with sanctions, and also to track individual sea cargo containers in real-time and predict estimated time of arrival and delays.

The group’s AI-powered solution allows stakeholders including banks, commodity traders, insurers, and major energy and shipping companies to make real-time, predictive intelligence-driven decisions, providing a 360° view of the maritime ecosystem and its broader impact on safety, security, finance, and business.

The company is further commercialising a carbon emission optimisation module for the shipping industry.

Co-Founder and CEO Ami Daniel stated that:

“2023 has been a record year for Windward, winning multiple new customers while expanding our offering.

We have delivered strongly on our execution and believe Windward’s opportunity set has expanded. 

As the evolving events in the Russia-Ukraine conflict and the security situation in the Red Sea demonstrate, the need for visibility and actionable insight across all facets of the maritime industry continues to grow, driving adoption of our maritime AI platform.

We are committed to providing our customers with the insight they require to trade with confidence and have begun 2024 with continued good momentum.”

Analysts at Canaccord Genuity rate the group’s shares as a Buy, raising their Price Objective from 115p to 135p on the back of last Friday’s guidance by the group.

They look for the group to have increased its 2023 sales from $21.6m to $28.3m, significantly reducing its adjusted pre-tax losses from $16.4m to just $6.1m.

For the year now underway they see $34.5m revenues, a further reduced loss of just $2.6m.

Progressing ahead they suggest that $41.4m of sales is possible in the year to end December 2025, almost bringing the company into a break-even position, estimating only a $0.3m loss.

Just sit tight and watch the shares climb in price and value as the market eventually clicks on to what Windward really offers.

(Profile 03.04.23 @ 37.5p set a Target Price of 47p*)

(Profile 13.12.23 @ 80p set a Target Price of 100p*)

(Asterisks * denote that Target Prices have been achieved since Profile publication)