Citi: Time To Sell Navios Maritime

Navios Maritime Holdings Inc. (NYSE: NM) shares have surged 53 percent since January 27. Citi’s Christian Wetherbee downgraded the rating for the company from Neutral to Sell, while raising the price target from $0.85 to $1. The analyst commented that shares had recovered “a bit too quickly” and were trading “too far from recent lows.”

Cash Burn Situation To Continue

“Recent improvement in dry bulk rates and prospects for further improvement do not warrant material optimism that the worst is necessarily behind us,” analyst Christian Wetherbee commented. While rates may continue to improve, even at higher rates, there would be several companies that would continue to burn cash. Navios Maritime would be one of them, Wetherbee said.

Although there may not be “a liquidity event” in the near term, the appropriate valuation of the company is below the current levels, the analyst explained.

Wetherbee estimated the rate of Navios Maritime’s cash burn at about $17.3m per quarter in 2016. He added, however, that “the company’s $163m cash balance, relatively liquid equity holdings in subsidiaries, and receivable securitization capacity” offer liquidity in the near-to-intermediate term.

Navios disclosed that Vale SA (ADR) (NYSE: VALE) would not be able to honor its contract for iron ore loading through Navios Logistics’ facility, which is under construction in Uruguay. Wetherbee mentioned that Navios Logistics was seen as one of the company’s more solid segments; therefore, the risk to future EBITDA from the recent news would be a “material headwind to improving valuation.”