Golden Ocean Group Sits in an Enviable Position Within Dry Bulk Sector

(Bloomberg) — Golden Ocean Group Ltd., the dry bulk shipping group controlled by billionaire John Fredriksen, rose in Oslo as a strong balance sheet and low vessel values allow it to expand ahead of an expected increase in rates.

Shares in the Hamilton, Bermuda-based company climbed as much as 3.7 percent to 5.97 kroner as of 10:45 a.m. That makes Golden Ocean the biggest gainer on the Oslo stock exchange’s benchmark OSEBX index after Renewable Energy Corp., a maker of solar energy products.

Golden Ocean bought an 180,000 deadweight-ton Capesize carrier with a partner for a “favorable price,” the company said in a statement last week. The board sees the “risk/reward as attractive from a historical perspective,” it said.

Golden Ocean, in which Fredriksen owns a 41 percent stake, is expanding its fleet to take advantage of historically low values as it bets on a recovery in rates. The Baltic Dry Index, a measure of commodity shipping costs, averaged 920 last year, the lowest level since 1986, according to figures from the Baltic Exchange, the London-based publisher of freight rates.

Fredriksen, who also owns stakes in Frontline Ltd., Golar LNG Ltd. and Seadrill Ltd., will keep investing in the ship industry that helped him build his fortune, he said on Jan. 24.

“Golden Ocean is in the fortunate position of being one of very few dry bulk companies financially able to benefit from historically low vessel values,” Eirik Haavaldsen, an analyst at Pareto Securities ASA, said in a note dated May 23.

Fleet Expansion

“Though the underlying market has been very weak in the year-to-date, we expect the market balance to improve in the latter half of the year and consequently rates will increase.”

Golden Ocean is interested in buying second-hand modern vessels and newbuilds, as well as taking out long-term leases with purchase options, it said Feb. 19. “Such opportunities may also include distressed corporate deals,” it said, and it’s currently in discussions over possible acquisitions.

Shares in the company have gained 36 percent in the past year, giving Golden Ocean a market value of 2.7 billion kroner ($465 million.) The shipping group, which is scheduled to announce first-quarter results on May 28, is expected to report net income of $7.6 million, down from $13 million a year earlier, according to the average of 10 analyst estimates compiled by Bloomberg.

– Alastair Reed, Copyright 2013 Bloomberg.

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