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GOGL

Golden Ocean Group NasdaqGS:GOGL Stock Report

Last Price

US$7.69

Market Cap

US$1.5b

7D

-9.5%

1Y

-26.6%

Updated

26 Sep, 2022

Data

Company Financials +
GOGL fundamental analysis
Snowflake Score
Valuation3/6
Future Growth0/6
Past Performance5/6
Financial Health4/6
Dividends3/6

GOGL Stock Overview

Golden Ocean Group Limited, a shipping company, owns and operates a fleet of dry bulk vessels comprising Newcastlemax, Capesize, Panamax, and Ultramax vessels worldwide.

Golden Ocean Group Limited Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Golden Ocean Group
Historical stock prices
Current Share PriceUS$7.69
52 Week HighUS$16.46
52 Week LowUS$7.59
Beta1.29
1 Month Change-26.34%
3 Month Change-33.48%
1 Year Change-26.62%
3 Year Change32.13%
5 Year Change-0.52%
Change since IPO-63.73%

Recent News & Updates

Sep 22
Is Golden Ocean Group (NASDAQ:GOGL) Using Too Much Debt?

Is Golden Ocean Group (NASDAQ:GOGL) Using Too Much Debt?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility...

Sep 16

Golden Ocean Group: Eradicating COVID-19 From China Is About To Hurt

Summary Golden Ocean Group was the metaphorical golden goose for shareholders with massive dividends during 2021 and early 2022. Although sadly, it now appears to be inflicted with Covid-19 as China battles to eradicate cases from their country. This is hindering demand for dry bulk shipping at the same time that port congestion eases, thereby sending rates plunging. Once this flows through to their company later in the year, their leverage will surge to concerning levels and see their dividends plunge. Since there is seemingly more downside risk than upside potential, I believe that maintaining my sell rating is appropriate. Introduction The booming operating conditions within the dry bulk shipping industry during the last twelve months saw Golden Ocean Group (GOGL) as the metaphorical golden goose for shareholders with massive dividends. Although these extremely profitable times cannot last forever and thus back several months ago, it was seemingly time to abandon ship with the best days over, as my previous article warned. Whilst their subsequent financial performance was surprisingly strong and saw their massive dividend yield of 20%+ continue for another quarter, structural issues have not been resolved and if anything, they have worsened and unfortunately, eradicating Covid-19 from China is about to hurt their free cash flow and thus their dividends. Executive Summary & Ratings Since many readers are likely short on time, the table below provides a very brief executive summary and ratings for the primary criteria that were assessed. This Google Document provides a list of all my equivalent ratings as well as more information regarding my rating system. The following section provides a detailed analysis for those readers who are wishing to dig deeper into their situation. Author *Instead of simply assessing dividend coverage through earnings per share cash flow, I prefer to utilize free cash flow since it provides the toughest criteria and also best captures the true impact upon their financial position. Detailed Analysis Author After seeing their cash flow performance soften during the first quarter of 2022 versus the fourth quarter of 2021, as discussed within my previously linked article, their result for the second quarter of 2022 was surprisingly strong. In fact, their operating cash flow climbed to $279.1m for the first half with the second quarter alone representing $155.5m and thus modestly higher than the $123.6m from the first quarter. Despite being better than expected and resulting in their variable quarterly dividends increasing to $0.60 per share, the risks on the horizon have not been alleviated and if anything, they have actually worsened. Virtually every investor would already know that China is the single biggest and thus most important market for the seaborne trade of dry bulk goods, such as iron ore and coal. Their economic resilience during 2020 and 2021 as Western countries battled Covid-19 fuelled demand for dry bulk shipping in 2021 and early 2022 but alas, it appears that these fortunes are swinging the other way. Even though the pandemic seemingly became a background story throughout the West, the same cannot be said for China, which is sticking with their zero Covid-19 policy that continues to see millions of people in lockdown. Unsurprisingly, this policy is compounding issues within their heavily indebted property sector and hindering economic activity. By extension, this is hindering dry bulk shipping rates at the same time as port congestion is clearing, thereby sending spot rates for their Capesize vessels plunging to sub-$10,000 per day by mid-August, which was far below their cash breakeven of $13,000 per day, as per slide eight of their second quarter of 2022 results presentation. Despite September seeing a rally, the Baltic Exchange Dry Index that tracks dry bulk shipping vessels remains a shadow of where it was one year ago, as per the graph included below. Trading Economics Earlier in the year, it was hoped that China would relax their zero Covid-19 policy but alas, this did not transpire and according to the analysts at Goldman Sachs (GS), they are likely to keep this heavy-handed approach into 2023. Unless they reverse course unexpectedly, this will see the pressure levied upon their economy continue for the foreseeable future, which is certainly not a positive outlook for dry bulk shipping that is clearly already seeing tough times. They recently announced new a stimulus program but given its relatively minor $44b size, it is only topping up their earlier same-sized program. As a result, it does not offer much assistance to their construction industry that ultimately drives demand for dry bulk shipping and thus, it could be said that commodity markets were not impressed. Whether they announce further stimulus programs is uncertain but considering their famous ghost cities that have arisen from earlier massive stimulus programs, I am skeptical that throwing more money at stimulus is the answer in the medium to long-term. Admittedly, their fleet sees strong contract coverage of 80% and 96% for their respective Capesize and Panamax vessels during the third quarter of 2022, although this quickly drops to only 25% and 27% respectively during the fourth quarter, as per slide fifteen of their previously linked second quarter of 2022 results presentation. If these weak spot market rates persist, which is certainly not impossible given this outlook, their financial performance is set to deteriorate rapidly as the end of the year approaches and thus, 2023 could see a downturn. Author Following the second quarter of 2022, their net debt edged slightly lower to $1.182b versus when conducting the previous analysis following the first quarter when it was $1.278b. Notwithstanding this improvement, it remains higher than its previous level of $1.086b at the end of 2020, where it was before the recent booming operating conditions. If removing their leases, it would have ended the second quarter of 2022 at $1.033b, which is barely lower and when compared to their previous level of $892.4m at the end of 2020, it is actually higher and thus no matter how their capital structure is viewed, it is more indebted than before the booming operating conditions of 2021 and early 2022. Author Thanks to their surprisingly strong financial performance during the second quarter of 2022, their leverage decreased more than expected with their respective net debt-to-EBITDA and net debt-to-operating cash flow down to 1.73 and 1.98. Apart from representing a modest decrease versus their previous respective results of 2.14 and 2.46 when conducting the previous analysis following the first quarter, they are now also within the low territory of between 1.01 and 2.00. Whilst this obviously poses no issues right now, the words "right now" should be emphasized because they are vulnerable since they did not utilize their recent cash windfall to reduce their net debt versus previous years. To provide an example, the end of 2020 saw their respective net debt-to-EBITDA and net debt-to-operating cash flow at 7.71 and 7.72 and thus well above the threshold of 5.01 for the very high territory, which is still evident when looking back at the end of 2019 that saw respective results of 6.08 and 7.49. Despite having a healthy financial position at the moment, it rests solely upon their booming financial performance and sadly, not long-term solid fundamentals. The future remains uncertain but this nevertheless highlights that their fortunes can turn on a dime and could make deleveraging a priority in the future, which would be toxic for dividends in the short to medium-term since it would likely coincide with less free cash flow.

Sep 09

Golden Ocean Group: Don't Fear This Pullback - It's Time To Be Brave And Buy More

Summary GOGL has underperformed in the broad market since our previous update. Investors' concerns have turned to the worsening macro headwinds as a looming recession is getting closer. Therefore, some early investors have likely used the opportunity to reduce their positions in GOGL to protect their gains. However, we are confident that its structural drivers are intact. We surmise that Golden Ocean's moderation in growth should bottom out in FY23, after its laps challenging comps from FY21. Hence, it could help recover buying sentiments. We discuss why we reiterate our Buy rating on GOGL. Thesis Golden Ocean Group Limited (GOGL) stock has underperformed the market on a total return basis (including its recent dividend payout) as investors focused on recessionary themes. However, we urge investors not to bail out now. Like its leading dry bulk peers, Golden Ocean needs to go through this period of normalization after a massive growth phase in 2021, as multitudinous tailwinds underpinned its business. Therefore, some reversal of the tailwinds should be expected as port congestion eases, coupled with China's unpredictable and harsh COVID lockdowns in Q2. As a result, China's economy weakened further in Q2, causing more mayhem in the commodity markets and inciting fear of demand destruction. However, management remains confident that the medium-term outlook in its business remains robust, coupled with regulatory tailwinds. Hence, we view the recent post-ex dividend capitulation move as a solid opportunity for investors to consider adding more positions. Accordingly, we reiterate our Buy rating on GOGL. Investors Are Justifiably Concerned With Recessionary Headwinds Q2 was challenging for Golden Ocean, as tough comps and worsening macro headwinds impacted the market's confidence in the leading dry bulk players sustaining their elevated time charter equivalent (TCE) rates. China's COVID lockdowns-driven and property-related headwinds have also continued to hamper the recovery of the world's second-largest economy. As a result, China's steel industry has slowed tremendously, affecting iron ore demand markedly. Industry analysts/insiders were also concerned that it could portend a structural decline, as Nikkei Asia/Caixin reported: The property sector, which accounts for over one-third of the country's steel consumption, has been squeezed by a liquidity crunch and sliding sales since the end of last year. This comes amid an ever-expanding mortgage boycott by disgruntled homebuyers over stalled construction projects. [China Baowu Steel Group] said that the steel market is facing a steeper downturn than in 2015, with no end or bottom in sight. "The contradiction between steel supply and consumption will be a long-term issue. As China's urbanization and industrialization advance, the overall demand for steel will gradually decline," [said the China Iron and Steel Association]. - Nikkei Asia Golden Ocean's Growth Has Normalized Further Golden Ocean TCE change % (Company filings) As a result, the growth in Golden Ocean's time charter equivalent (TCE) rates slowed dramatically in Q2, up just 18.1%, down from Q1's 53.2%. It was also the second consecutive quarter that its growth rates have decelerated. Therefore, we believe there's little doubt that challenging comps and a much harsher macro environment impacted its TCE growth cadence. Furthermore, management's guidance for H2 suggests that TCE growth rates could slow further and even decline, given touch comps against Q3'21, as seen above. Management highlighted: Looking at this quarter, Q3, we have so far secured $28,000 per day for 80% of our Cape days, $27,000 per day for [96%] of our Panamax days. Looking into the next quarter, Q4, we have secured $29,000 per day for 25% of our Cape days and $22,000 per day for 27% of our Panamax days. In other words, we have taken out fixed paying cover at good rates for the remainder of the year to hedge against near-term uncertainty. (Golden Ocean FQ2'22 earnings call) As a result, we believe investors have been adjusting their expectations, given expected TCE rates compression in H2'22. Hence, investors should not be surprised by the weakness in GOGL's price action. Golden Ocean revenue change % and adjusted EBITDA change % consensus estimates (S&P Cap IQ) Consequently, we surmise the consensus estimates (bullish) are credible, suggesting Golden Ocean's revenue and adjusted EBITDA growth should turn negative in Q3'22. But, it also indicates that the moderation is likely transitory, with GOGL lapping FY22 comps by Q3'23 before recovering from its nadir. Therefore, investors need to ask themselves whether they believe in the medium- to the long-term structural narrative for Golden Ocean's business. Management was unequivocal in its earnings commentary, accentuating its confidence in the structural tailwinds undergirding its recovery. It added: Despite the uncertain macroeconomic context, dry bulk fundamentals are constructive, driven mainly by an attractive supply side. In this segment, the order book is below 6% of the global fleet and at 30-year lows. Combined with inefficient coal and grain trades, [the] impact from the IMO regulations in 2023, it is practically impossible to have a negative view on supply. We believe the dry market will be challenged in the short term until China's growth normalizes and the rest of the world has battled inflation. Having said that, a rebound from the current levels is likely before the turn of the year. While we acknowledge macroeconomic factors, we do not expect the type of deep prolonged recession that would have an overweight impact on the demand side of the equation. (Golden Ocean earnings)

Sep 06
Is Golden Ocean Group Limited (NASDAQ:GOGL) Potentially Undervalued?

Is Golden Ocean Group Limited (NASDAQ:GOGL) Potentially Undervalued?

Golden Ocean Group Limited ( NASDAQ:GOGL ), might not be a large cap stock, but it saw significant share price movement...

Sep 02

Golden Ocean goes ex-dividend on Tuesday

Golden Ocean (NASDAQ:GOGL) had declared $0.60/share quarterly dividend, 20% increase from prior dividend of $0.50. Payable Sept. 14; for shareholders of record Sept. 7; ex-div Sept. 6. See GOGL Dividend Scorecard, Yield Chart, & Dividend Growth.

Shareholder Returns

GOGLUS ShippingUS Market
7D-9.5%-10.2%-6.9%
1Y-26.6%-32.0%-23.7%

Return vs Industry: GOGL exceeded the US Shipping industry which returned -29.2% over the past year.

Return vs Market: GOGL underperformed the US Market which returned -23% over the past year.

Price Volatility

Is GOGL's price volatile compared to industry and market?
GOGL volatility
GOGL Average Weekly Movement7.6%
Shipping Industry Average Movement7.5%
Market Average Movement6.9%
10% most volatile stocks in US Market15.7%
10% least volatile stocks in US Market2.8%

Stable Share Price: GOGL is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 8% a week.

Volatility Over Time: GOGL's weekly volatility (8%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
n/a37Ulrik Andersenhttps://www.goldenocean.bm

Golden Ocean Group Limited, a shipping company, owns and operates a fleet of dry bulk vessels comprising Newcastlemax, Capesize, Panamax, and Ultramax vessels worldwide. It owns and operates dry bulk vessels in the spot and time charter markets. The company transports bulk commodities, such as ores, coal, grains, and fertilizers.

Golden Ocean Group Limited Fundamentals Summary

How do Golden Ocean Group's earnings and revenue compare to its market cap?
GOGL fundamental statistics
Market CapUS$1.54b
Earnings (TTM)US$688.22m
Revenue (TTM)US$1.35b

2.2x

P/E Ratio

1.1x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
GOGL income statement (TTM)
RevenueUS$1.35b
Cost of RevenueUS$560.28m
Gross ProfitUS$785.02m
Other ExpensesUS$96.80m
EarningsUS$688.22m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Nov 30, 2022

Earnings per share (EPS)3.43
Gross Margin58.35%
Net Profit Margin51.16%
Debt/Equity Ratio61.8%

How did GOGL perform over the long term?

See historical performance and comparison

Dividends

46.8%

Current Dividend Yield

83%

Payout Ratio