Seaspan Corp. (SSW)

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UPDATE 1-RESEARCH ALERT-FBR starts coverage of shipping sector

May 20 (Reuters) - Friedman Billings Ramsey began coverage of the shipping industry, saying the sector, which is amidst a deep cyclical downturn, is poised for a recovery in 2011.

"The sharp decline in demand, coupled with numerous newly built vessels, should heavily imbalance the market over the next two years," analyst Robert MacKenzie wrote in a research note to clients.

"We are forecasting sizeable 10 percent and 20 percent excess capacity in the dry-bulk and container markets, respectively, for both 2009 and 2010, which coupled with limited bank financing should continue to depress asset prices," he added.

However, MacKenzie believes that the lack of available financing should lead to heavy order-book cancellations and construction delays that he expects to ultimately balance the dry-bulk and container markets by 2012.

The analyst also said the tanker market could recover early as demand for oil could rise quicker than that for the iron ore, adding that the oversupply of vessels in the tanker market is not as great as in dry bulk.

MacKenzie initiated coverage of dry bulk carrier Diana Shipping Inc (DSX.N) with an "outperform" rating, saying the company has ample liquidity to acquire vessels before assets appreciate and that it could further bolster its stock price through multiple expansion.

He also initiated coverage of dry-bulk and containership owner Euroseas Ltd (ESEA.O) with a "market perform" rating, saying the challenges of the older fleet are partially offset by the opportunities of no net debt and contract coverage that supports a dividend, which in turn is supporting the stock.

Shares of Diana Shipping were trading up 2 percent at $16.60 on the New York Stock Exchange, while Euroseas was up nearly 4 percent at $6.08 on Nasdaq. (Reporting by Hezron Selvi in Bangalore; Editing by Anil D'Silva)

http://www.reuters.com/article/marketsNews/idINBNG46678320090520?rpc=44