Deutsche Bank Upgrades Star Bulk To Hold

In a report published Monday, Deutsche Bank analyst Amit Mehrotra upgraded the rating on

from Sell to Hold, while raising the price target from $2 to $3, following meeting with the management that offered a better view of the company's cash position. "Our upgrade reflects three key points: (1) Post the recent sell-off shares now appear to better discount headwinds associated with the dry bulk market; (2) Mgmt. has taken proactive (& painful) steps to shore up its cash position, and; (3) We are becoming more constructive on dry bulk as sentiment and valuation appear at trough levels," Mehrotra explained. The analyst believes that the company is currently well positioned to cope with a prolonged downturn without having to resort to additional dilutive financing, following Star Bulk's equity raise in January and May. "Even after assumptions for prospective cash burn for the remainder of '15 and debt repayment this year and next, we estimate SBLK will have $285M of truly "excess" cash in 2016, which in the context of 27,000 operating days provides more-than-enough cushion, in our view," the Deutsche Bank report said. At the same time, the analyst cautioned that the company continues to face significant challenges due to its large on-the-water fleet, which leads to considerable cash flow, and capital commitments related to its newbuilding book. The analyst also expects the stock to remain range bound till there is an improvement in the rate environment.