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Posted in _Public | 5 Comments

LNG Carriers: The Best Is yet to Come (25 page report)

As expected, LNG Carrier earnings have fallen since the peak in December. The start of the year is nevertheless the best over the past four years and spot rates are 60% above 2017 YTD. We see continuously rising annualized utilization towards the end of this decade, with corresponding improvements in earnings, vessel values and share prices. We reiterate our BUY recommendation on LNG Carriers and highlight Flex LNG (TP 18) and GasLog (TP 25) as our top picks.

Estimate changes: Although 1Q18 spot rates outperformed our forecast, we do limited changes to 2Q18 as vessel slippage was a key factor and current spot rates are in-line with our previous expectations. Looking further afield and building on seasonally strong 1Q18 demand, we marginally lift our utilization forecast to 81% in 2018 (79%), 83% in 2019 (82%) and 87% in 2020 (86%). This represents spot rates ((T)DFDE 160k cbm basis) of $57k/d ($52k/d), $67k/d ($62k/d) and $83k/d ($80k/d), respectively.    

Key investment opportunities: The second quarter of the year has historically been the weakest quarter of the year, coming off the heating season and awaiting air condition season in the Northern Hemisphere. Adding an estimated 4.3% net supply growth q/q, we forecast spot rates to edge down from current $44k/d to average $39k/d in 2Q. We expect improvements in 3Q before five-year highs towards $100k/d during 4Q18/1Q19. We highlight Flex LNG (BUY, TP 18) as our top pick in the sector but also upgrade GasLog to BUY (TP 25) due to raised EBITDA forecast and weak share price performance since our February downgrade to HOLD.

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Posted in LNG carriers, shipping | Tagged , , , , , , , | 1 Comment

HUNT-NO (BUY, TP NOK 3.3): Initiation of New VLCC Pure-Play

Mr. Arne Fredly is in the process of re-branding failed Oslo-listed oil service company Hunter Group (former Badger Explorer) into a VLCC pure-play, infusing four VLCC newbuilds plus three optional berths at DSME. Given our view of ~70% asset price appreciation by the scheduled delivery time of the last optional vessels in 2Q20, we initiated coverage with a BUY recommendation and NOK 3.3/sh target price.

Company overview: The company had a cash position of $34m YE’18, positive NWC but few other tangible assets.  The share count is currently 131m, but assuming max size from the announced private placement and including potential warrants to Mr. Fredly, the fully diluted share count should land at 219m. Based on today’s press release, Fredly will own 33.29% before a potential private placement.

Fundamentals: We reiterate our view that the cyclical inflection point for oil tankers is mid-’18, and forecast shares to trough in 2Q18. In addition to the link above, we are currently reviewing our forecast for 2H18 and beyond with delta skewed to the upside…

Valuation: There are many ways forward for HUNT to capitalize on improving fundamentals with the current setup. We assume full size NOK 173m from the announced private placement and all three berth options declared. We calculate a current NAV/sh of NOK 2.3 and a forward NAV of 5.4/sh. Weighted 70/30 to reflect that a number of actions have to be executed successfully to unlock the forward NAV, we arrive at our NOK 3.3 target price (+19%).

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Posted in Oil services, oil tankers, shipping | Tagged , | Leave a comment

Dry Bulk Shipping: Enough Dry Powder Left for the Next Boom (78 page report)

As we stand in the seasonally weakest dry bulk market of the year, we cannot help notice that spot rates YTD are up 25%, 1y time charters are at 3y highs and that FFAs reflect the same. The only pieces missing are a corresponding appreciation in asset and share prices, but we believe it is just a matter of time. Net supply growth of close to zero over the next two years vs a positive demand growth will add to the ongoing cyclical expansion. We reiterate our BUY on dry bulk shipping and see shares potentially 150% higher in one year.

Estimates: We do limited changes to our estimates and forecast utilization to rise steadily from 84% in 2017 to 89% in 2020E, corresponding to Capesize spot rates rising from $15k/d in 2017 to $33k/d in 2020E and the market value of a 5y old Cape to rise 50% by 4Q19 from the current $34m. The latter is further supported by current 1y time charter rates which already implies a fair value of around $40m (+17%).

Key investment opportunities: Although it is challenging to pin-point when, we believe dry bulk shares will rally sometime before the year end, spurred on by consecutive years of higher earnings and rising vessel values. Our top picks are: 1) Star Bulk (BUY, 22) for its cash flows and high elasticity to asset values, 2) Diana Shipping (BUY, 6.7) for the largest discount to steel in our universe, 3) Genco Shipping (BUY, 26) for its cash flows and low P/NAV and 4) GoodBulk (BUY, 212) as an imminent NY listing should reprice this Cape play. The single biggest risk to our bullishness is the developing trade war between the US and the rest of the world.

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Posted in dry bulk, shipping | Tagged , , , , , , , , , , , , , | 3 Comments

LPG Shipping: Imminent Seasonal & Cyclical Upside

We see the cycle turning to expansion in 2018 as supply growth turn negative and annualized demand growth continues around 10%. We also see signs of seasonal factors materializing, including more US LPG available for export, a rising price differential between Naphtha and LPG and stock building ahead of next winter. Thus, we expect an imminent upswing in spot rates from 2Q18 and forecast shares on average 94% higher in one year.

Market: We believe negative supply growth and imminent seasonal demand improvements will lead to significantly higher earnings from 2Q18. Add annualized demand growth of ~10% and a transparent low orderbook until 2020, the foundation is laid for the next cyclical expansion. Second hand LPG vessels are currently at trough levels and prices not seen since early 2004. When adjusting for inflation, second-hand prices are hovering around their lowest on record going back to 2000. Given current share pricing, investors are thus able to buy modern vessels at a 13-24% discount to all-time-low levels getting the operational organization for free.

Investments: AVANCE (BUY, 56) is our #1 pick trading at a P/NAV of 0.59 (peers 0.62) and 1y fwd NAV of 0.38 (0.48) even after applying a China-discount to its applicable fleet. Add high operational leverage and we see EV/EBITDA in ‘19E of 4.3 (4.6) and potential dividend yield of 41% (26%). LPG (BUY, 14) is ticking all the same boxes as Avance, but it ranks #2 as the discount is slightly lower across the board. BWLPG (BUY, 69) also has significant upside in our view, but the historically lower operational leverage from its industrial approach means it is not the best bet in the cyclical expansion.

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Posted in LPG shipping, shipping, VLGC | Tagged , , , , , , | 9 Comments

TNK (SELL, TP 0.5) 4Q17 Review: Liquidity Concerns Remain

Teekay Tankers posted 4Q17 numbers slightly above or forecast and far above consensus. More important was a liquidity position in-line with our expectations, which assuming a successful refinancing of the Aug/18 balloon payment still leaves the company in a very challenging liquidity position. We see limited room for manoeuvre given a highly leveraged balance sheet, and fear a forced reduction of leverage at the cyclical trough. We reiterate our SELL recommendation and downgrade our target price to USD 0.5/sh (from 0.7)

Liquidity: The company reported short term cash of $73m in 4Q17, similar to our forecast of $77m. Further, the company is optimistic in terms of refinancing a $64m balloon payment ahead of its Aug/18 maturity. Assuming successful, our base case is for a minimum liquidity position of -$86m in 3Q19. As we have highlighted time and again, we still “believe further fleet divestments, a debt moratorium and/or further sale/leasebacks” will be needed. Until then, we advise investors to stay clear of Teekay Tankers and find better risk/reward Oil Tanker exposure in peers such as NAT (HOLD, TP 2.3) and EURN (HOLD, TP 8.1) ahead of the cyclical inflection point in mid-18.

Valuation: We calculate a current NAV of USD 1.05/sh, but fear unfavourable divestments at the trough and dislike the limited cash flow generation. Our target price of USD 0.5/sh is based on a weighted average of current/future NAV and mid-cycle multiples in 2019E at a 20% discount (liquidity concerns).

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GOGL (BUY, TP 12.5) 4Q17 review: Dividends Begin

Golden Ocean declared a $0.10 DPS for 4Q17, spot on our forecast but taking consensus by surprise. The numbers were roughly in-line with our estimates but above consensus. The share price reacted accordingly and ended the day +2.8% d/d in Oslo. We reiterate our BUY rating and $12.5 target price ahead of continued fundamental improvements ahead.

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4Q17 review: Net sales of $122m in the quarter came in $8m above our forecast ($15 above consensus), although offset by operational cost of $61m vs our forecast of $51m and consensus at $49m. Thus, reported EBITDA of $61m was slightly below our $63m forecast but above consensus at $58m. Net finance was similar to our $16m forecast, but a $2m gain on derivatives and other minor adjustments led to a PTP of $27m which was equal to our $27m expectation (consensus at $23m). The most important event was the reinstatement of dividends after the last pay-out in 2014. After the resumption of regular debt payments, we had precisely predicted the DPS of $0.10 declared for the quarter. However, the announcement took the market by surprise against the street’s forecast of a zero dividend. This is likely the main reason behind the 2.8% share appreciation d/d today.

Investment case: Although priced at a 34% premium to NAV vs the peer median at a 2% discount, it is not discouraging as the company has historically been trading at a premium to peers due to its track-record of investor friendly policies. Given our forecast of improving fundamentals going forward, we see an EV/EBITDA of 5.7 in 2019E (peer median at 4.1) and a potential dividend yield of 16% (peer 17%). Although our target implies a 32% share price appreciation, we see higher upside potential in GNK (BUY, 26), SBLK (BUY, 21) and DSX (BUY, 6.7), which remain our top picks in the segment. We also keep a keen eye on BULK (BUY, 198) with listing in NY scheduled for 2018.

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Posted in dry bulk, shipping | Tagged , , , , , , , , , , | Leave a comment

AVANCE (BUY, TP 60) 4Q17 review: Massive upside ahead

The 4Q17 numbers were in-line with expectations, with few surprises emerging in the report or presentation. Avance rallied 7% on the day amongst a general appreciation of the VLGC segment. As we enter the seasonally strong period from April to August, we simultaneously expect supply growth to turn negative. Add annualized demand growth of ~10% and we remain highly optimistic on the share price development over both the short- and long-term horizon. We reiterate our BUY recommendation and have a NOK 60 target price.

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4Q17 review: The results were largely in-line with ours and consensus’ forecast. The company achieved a timecharter equivalent (TCE) on its fleet of $12,262/day, below our forecast of $13,823. However, this was offset by a utilization of 97% in the quarter vs our 91% forecast. There is naturally a trade-off between utilization and spot rates achieved in the currently depressed market, and Avance struck a balance which was very close to our expectations.

 Investment case: Avance is our #1 pick in the VLGC space, trading at a P/NAV of 0.54 (peers 0.60) and 1y fwd NAV of 0.34 (0.46) even after applying a China-discount to its applicable fleet. Add historically high operational leverage and we see EV/EBITDA in ‘19E of 4.0 (4.5) and potential dividend yield of 48% (29%). We have generated a 139% return on our recommendations since Mar/14 (vs consensus’ -81%), and see 175% upside potential ahead as the VLGC segment is repriced in concert with the cyclical upturn.

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Posted in LPG shipping, shipping | Tagged , , | 1 Comment

2018: Firing on all Cylinders (26-page report)

Never before have we been so optimistic across all sub-segments of the shipping/oil service sectors simultaneously as we now are for 2018. All segments have either just entered the expansionary phase of the business cycle, or will experience the inflection point in 2018. Thus, we find ourselves in an extraordinary situation where a potential 109% return over the next year is being dependent on careful capital allocation. In this report, we outline our top picks for 2018 in terms of timing, segments and shares, focusing on maximizing return/risk.    

Key opportunities: We have short- & long-term BUY recommendations on Dry Bulk, LNG Carriers, LPG Carriers and Rig, while we have a short-term HOLD on Oil Tankers. The latter is a tough call as we also see the largest upside in this segment over a one-year horizon. We believe Oil Tanker shares will be weak in 1H18, creating opportunity to accumulate shares ahead of the cyclical inflection point in mid-‘18. 

Key concerns: As we began preparing this report in late January, our main concerns were: 1) A broad market correction/crash, 2) a significant decline in oil prices (negative for Oil Services, LNG & LPG) and 3) a significant uptick in newbuild contracting. As of today, our first concern is under development and #2 still hangs in the balance. Turmoil in the equity markets is an unfortunately part of the life of an investor, but can also be used opportunistically to rebalance the portfolio. Although not immune against broad share index movements, our universe has rather low correlations to index ranging from 0.21 (LPG Carriers) to 0.61 (LNG Carriers).

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Posted in _Public, dry bulk, LNG carriers, LPG shipping, Oil services, oil tankers, rig, shipping, VLGC | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Oil Tanker Sector Update (SELL): Disappointing Winter Market

Although we cannot rule out another dead cat bounce, this year’s winter market has been disappointing. As we predicted, VLCC spot rates peaked at $32k/d, and volatility created opportunities for the attentive investor. However, oil tanker spot rates have averaged $11.7k/d QTD vs our forecast of $13.4k/d, with lower net supply growth (0.3% q/q vs 1.0%) offset by even lower implied demand growth vs our forecast (4.8% vs 7.1%). We downgrade the sector from HOLD to SELL as we see further downside risk to share prices and asset values ahead of the inflection point in mid-‘18E.

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Peer overview: We estimate an average peer P/NAV of 1.0 with a range from 0.5 (GNRT) to 1.6 (NAT). EV/EBITDA peer avg. in 2018E is 18x, and we are currently 32% below consensus on realized TCE rates for the year we believe to represent the trough. Further, we forecast peer avg. EV/EBITDA of 10x in ‘19E and 6x in ‘20E, and FCF yields to range 20% to 50% towards the latter part of this decade.

Key investment opportunities: Although it is challenging to find supportive valuation in most of our coverage, Gener8 Maritime (BUY, TP 5.7) stands out as an undervalued M&A target. The share price rallied after Frontline’s (SELL, TP 3.8) acquisition interest became official, but has since underperformed. We would carefully watch for seasonally improvements in the tanker spot market, and use GNRT as an undervalued proxy for exposure

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Posted in oil tankers, shipping | Tagged , , , , , , , , , , , | 3 Comments

2020 Bulkers Initiation (Hold, TP NOK 31)

2020 Bulkers is the newly established dry bulk investment vehicle of Mr Tor Olav Trøim (50% ownership), in partnership with Titan Opportunities Fund (20%) and former Clarksons Platou partner Fredrik Halvorsen (20%). We estimate a NAV of NOK 16.3/sh, but base our NOK 31/sh target price on a weighted average of future asset price appreciation models after a 10% discount. We believe a small discount is warranted as there are still some road to be covered before realizing the potential value appreciation behind our forecast, including a likely equity raise in order to pay the next newbuilding installments in 3Q18E (or options declared in 1Q18E).

The company currently consists of two firm Newcastlemax newbuildings with late 2019 delivery contracted at USD 44.23m each (vs our generic valuation of USD 44.17m). The company also has optional berths for another six sister vessels with delivery from 4Q19 to 2Q20.

Given the current USD 10m in equity vs USD 88.5m in paid and remaining capex, the asset value elasticity of NAV is an unprecedented 90%. This means that our TP of NOK 31 implies a resale vessel value of USD 46m, equal to our current generic vessel valuation. Assuming resale values increase only 10% implies a share price upon point of delivery of NOK 38/sh.

The only problem is that these calculation assumes no new equity. We believe leverage will decrease as capex has to be financed. Assuming a LTV of 70% leaves us with a asset value elasticity of NAV of 26%, and a 35% asset appreciation behind our NOK 31/sh target price, which is fair in our view.

Thus, we initiate our coverage with a Hold recommendation when comparing our target price vs the “market price” of NOK 30.5 seen in extremely thin trading so far on the N-OTC since listing this Monday. “Off-balance sheet” upside ahead could be provided from news flow and overly optimistic analysts eager for corporate business, which in turn could lead to accretive shares-for-ships deals and rising NAV/sh, all else equal. Still, we find better valuation in GNK (BUY, USD 21) and SBLK (BUY, USD 14) looking one year ahead. Before that, we expect the dry bulk space to soften before the year end and into 1H18E, before renewed optimism lifts shares to new highs.

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LNG Carrier Sector Update (BUY): Earnings Surge to Three-Year High

The dynamics for LNG carriers have changed and the cyclical inflection point is definitively behind us as spot rates surge towards levels not seen in three years. We see utilization rising steadily towards the end of this decade, with corresponding improvements in earnings, vessel values and share prices. We reiterate our BUY recommendation on LNG carriers and highlight Flex LNG (TP 18) and GasLog (TP 22) as our top picks.

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Estimate changes: Net supply YTD has been lower than our expectations, but we believe many of these vessels have slipped into 2018. We forecast supply growth of 7.1% (from 8.2%) in 2017E, 11.3% (10.9%) in 2018E and 8.0% (7.5%) in 2019E. Our demand forecast for 2017E is more or less unchanged at 13%, with 2018E at 14% (13%) and 2019E at 12% (15%). This increases the front-end of the utilization curve, with 2017E at 77% (76%) and 2018E at 80% (78%), representing spot rates (TFDE 160k cbm basis) of USD 46k/d (42k/d) and USD 52k/d (46k/d), respectively.

Key investment opportunities: We forecast avg. TCE across our peers at USD 62.7k/d in 4Q vs consensus at 49.8k/d. Thus, we expect a positive share price momentum from analyst’s upgrades ahead of next reporting season. Looking further, we expect a return to the USD 40s (TCE/d) in 1H18E due to demand seasonality and a surge of newbuildings hitting the water. Thus, we advise investor to stay long the sector and use any potential weakness in share prices to increase exposure ahead of significant upside towards the end of this decade. Our top picks remain Flex LNG and GasLog

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Posted in LNG carriers, shipping | Tagged , , , , , , , , , , | 1 Comment

Suezmax Resales 10% Below Current Valuation

Summary

  • Dong-A Spica & Dong-A Capella said to have been sold @ $48 each to two sperate Greek buyers.
  • 10% below our current generic fair value for a similar vessel, which is under revision for downgrade.
  • Consistent with our September report where we forecast asset values down ~10% by 2Q18E.
  • Last comparable done was the 2018 resale RS Kaystros sold to Polembros @ $49m in late October.
  • Key takeaway: Current asset values below current broker quotes + added downside risk as the Winter market draws to an end around 1Q18.

From our Twitter account: “#Suezmax resales sold @$48m each to #Greek buyers. 10% below or generic $53.5m for similar vessels (graph1), & consistent with our Sept report (LINK) where we argued 2Q18 could mark the through for vessel & share values $FRO $GNRT $EURN $DHT $NAT $TNK Oil Tanker Sector Upgraded to HOLD (SELL): Trade on Volatility as Recovery Looms “

 

Our September Sector Report:

Source: Gersemi Research, Bloomberg, company data
Disclaimer: The publisher currently owns shares in GNRT. More disclaimers at the end of this document. More disclaimers in the September sector report

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SBLK-US (BUY, TP 14) 3Q17 Review: Weak 3Q17 but TP unchanged

The 3Q17 report was a bit soft in our view, with average TCE of $9.6k/d vs our 10.7 forecast and G&A $2m higher than expected. Thus, EBITDA of $26m came in below our $35m forecast and consensus at 30m. EPS…

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SHIP-US (BUY, TP 2.9) 3Q17 Review

Highlights: TCE at USD 9.2k/d vs our forecast of 13.5k/d (100% utilization basis). Opex at USD 5.2k/d (+13% q/q) vs our forecast of USD 4.6k/d. Above weakness somewhat mitigated by G&A at USD 1.3m vs our USD 1.6m forecast. EPS…

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BULK-NO (BUY, TP 157) Update: Accretive Fleet Expansion

GoodBulk continues its rapid growth, acquiring seven modern Capesizes from CarVal (Cargill) with options for a further six. We believe the deal is highly accretive to current GoodBulk shareholders (NOK 5.7/sh), with the optionality on six more vessels adding upside….

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SOFF-NO (BUY, TP 10) Initiation

We initiate coverage of Solstad Farstad with a BUY recommendation and target price of NOK 10. We estimate a NAV/sh of NOK 12.6, but this estimate is extremely elastic to movements in fleet values due to an estimated adjusted equity…

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GOGL-US (BUY, TP 9.7) Update: Acquisitions & Dividends

Golden Ocean has closed a 11.7m share issuance at USD 8.5/sh to finance the acquisition of two modern Capesizes from Hemen and to raise gross USD 66m in cash. After this latest equity issuance and given the improved market fundamentals,…

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Dry Bulk Sector Update (BUY): Risk/Reward Still Attractive

As we correctly pointed out in mid-April, share prices were likely to be impact from the falling iron ore prices in 2Q. A similar pattern is developing as this report hits the press, and is key to the way forward…

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Oil Tanker Sector Upgraded to HOLD (SELL): Trade on Volatility as Recovery Looms

From being ready to write off the upcoming winter season a very short time ago and looking to mid-2018 for any meaningful recovery in share prices, the recent surge in scrapping has left us with a newfound cautious optimism. Using…

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Posted in oil tankers, shipping | Tagged , , , , , , , , , , , | 2 Comments

Teekay Tankers (SELL, USD 0.7): Challenging liquidity position ahead of the cyclical trough. TP revised down from 1.2

The company recently announced the acquisition of Tanker Investments in an all-share deal on a NAV-for-NAV basis, leaving TNK’s old shareholders with ~68% of the NewCo. The two companies form a natural fit as TNK owns 11% of TIL and…

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LNG sector update: Improving fundamentals

After more than two years of abysmal earnings, we now expect the worst is finally behind us. Although the recent increase in newbuilding contracting as a cause for concern, we remain confident in medium term improvements in earnings, vessel values…

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LPG-US: Initiation (Neutral, TP 6.9)

Dorian LPG has a fleet of 22 modern Very Large Gas Carriers (VLGC) with four on long time charters and the rest by large exposed to the current lackluster spot market. Recent corporate actions highlights the continued necessity of shoring up…

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Posted in LPG shipping, shipping, VLGC | Tagged , | 4 Comments

BWLPG-NO: Initiation (BUY, TP 37)

BW LPG controls a massive fleet of 51 Very Large Gas Carriers (VLGC) fully delivered in addition to four LGCs. The company has a history that exceeds most of its peers in addition to a differentiating industrial approach to LPG shipping,…

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Posted in LPG shipping, shipping, VLGC | Tagged | 1 Comment

Dry Bulk: Sector Upgraded to BUY

As we argued in our Dry Bulk: Sector Update in early April, share prices had moved too far too fast, disconnecting from the underlying fundamentals of the early expansionary phase of the cycle. We highlighted that the risk was skewed to the…

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AVANCE-NO: Initiation (BUY, TP 28)

Avance Gas has a fleet of 14 Very Large Gas Carriers (VLGC) mainly constructed in China and South Korea. Despite the full spot rate exposure in an abysmal market, the company will retain a robust liquidity position on our estimates ahead…

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Posted in shipping | Tagged , | 4 Comments

Tanker consolidation continues with TNK acquiring TIL

Teekay Tankers today announced the acquisition of Tanker Investments in an all-share deal which values TIL at a 21% premium to last close and which reflects a NAV-for-NAV transaction on our estimates. TIL’s shareholder will end up with 38% of…

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ESV acquires ATW to create an undervalued rig behemoth

In line with our expectations expressed in our initiation of Ensco (BUY, TP 17), the company takes on the role as consolidator in the current trough. Today, ESV announced the acquisition of Atwood Oceanics (BUY, TP 19) in an all-share deal that…

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DHT-US: Initiation (SELL, TP 4.0)

After an aggressive M&A attempt by Frontline that by some accounts is still ongoing but from a financial standpoint appears dead, the company acquired BW’s fleet of VLCCs through a combination of new shares and cash, and has emerged as one…

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TNK-US: Initiation (SELL, TP 1.1)

Teekay Tankers has a fleet of 41 fully owned Suezmaxes and Aframax/LR2s, a 50/50 owned VLCC  in  addition to a handful of chartered in vessels. Despite the recently announced divestment of a 1999-built Aframax at USD 7.5m (vs our generic value at…

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Posted in oil tankers, shipping | Tagged , | 1 Comment

NAT-US: Initiation (SELL, TP 4.8)

Nordic American Tankers has a fleet of  33 Suezmaxes (incl. three newbuldings) and a 23% ownership in Nordic American Offshore worth USD 15m (USD 0.15/sh). The company is currently priced at a P/NAV of 1.8 (peer avg of 0.9) and a dividend yield…

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EURN-US: Initiation (SELL, TP 6.2)

Euronav has a large fleet of crude tankers, consisting of 32 VLCCs, 23 Suezmaxes and a 50% ownership in two FSOs on long term charters. The company enjoys a large liquidity reserve and could play to role as consolidator in the…

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ALNG-NO: Getting ready to ride the cycle (BUY, TP 5.6 [6.9])

The company today announced a restructuring and recapitalization of the balance sheet by deferring charter hire payments to Teeky LNG Partners and a private equity placement of USD ~25m through a book building process. As we touched upon in our initiation in…

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Posted in LNG carriers, Uncategorized | Tagged , , | 2 Comments

FRO-US: Initiation (SELL, TP 3.2)

Representing the backbone of Mr Fredriksen’s oil tanker investments and spanning two decades, Frontline is still going strong after several transformational years from the verge of bankruptcy in early 2015 to the current sturdy fleet growth and pursuit of M&A possibilities. Although adding a…

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Posted in oil tankers, shipping | Tagged , | 2 Comments

GNRT-US: Initiation (SELL, TP 3.8)

Gener8 Maritime emerged in 2015 as the result of the merger between General Maritime and Navig8 Crude Tankers. The company has a fleet of 38 oil tankers trading spot, consisting of 23 VLCCs, 10 Suezmaxes and five Aframaxes/Panamaxes. GNRT is highly leveraged and…

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TIL-NO: Initiation (SELL, TP 33)

Originally set up as a well-timed asset play in early 2014, the company managed to divest a small portion of its fleet before the cycle turned to recession in 2016. Thus, the focus has shifted to operations ahead of the…

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Posted in oil tankers | Tagged , , , , | 1 Comment

FLNG-NO: Acquires two MEGI NBs (BUY, TP 17 [unch])

Flex LNG announced earlier this week the purchase of two MEGI LNGC newbuildings from Geveran (Mr. Fredriksen) at USD 180m apiece, which we view as attractive vs our generic valuation at USD 194m and as we see significant upside in asset prices over the next few years. The payment structure is 20% on completion of […]

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Posted in LNG carriers, shipping | Tagged , , , | 1 Comment

ALNG-NO: Initiation (BUY, TP 6.9)

The company is too small for most institutional investors, and we see limited prospects for growth. Despite the share illiquidity and stretched liquidity position on our estimates, we believe there is upside to the share price based on the continued massive discount on steel and our positive sector view. We initiate coverage of Awilco LNG with a BUY recommendation and target price of NOK 6.9 (+7%).

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HUNT-US: Initiation (Neutral, TP 9.2)

The company recently concluded its inaugural vessels acquisition, purchasing five Capesize vessels (built 2010/11) at an en-bloc consideration of USD 139m (accretive vs our valuation of USD 156m). We expect positive momentum from further fleet growth, increased analyst/investor focus and eventually improved share liquidity. However, this is offset by the current dilutive share class structure. Thus, we initiate coverage of Hunter Maritime Acquisition with a Neutral recommendation and target price of USD 9.2.

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Posted in dry bulk, shipping | Tagged , | 2 Comments

SB-US: Initiation (Neutral, TP 2.4)

The company is fairly priced on steel and has a high elasticity towards changes in asset prices at an opportune moment in the cycle. Additional attractiveness comes from a low cash break-even, although somewhat offset buy a steep fee structure and outstanding preferred shares. Thus, we initiate coverage of Safe Bulkers with a Neutral recommendation and target price of USD 2.4.

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BULK-NS: Initiation (BUY, TP 141)

We initiate coverage of GoodBulk with a BUY recommendation and target price of NOK 141. Share price drivers include current undervaluation, increased analyst/investor focus, further fleet growth and improved liquidity/full stock listing. GoodBulk was newly listed on OTC in Oslo after…

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Posted in dry bulk, shipping | Tagged , | 1 Comment

GLOG-US: Initiation (BUY, TP 18)

We initiate coverage of GasLog with a BUY recommendation and target price of USD 18. The company has a fleet of 27 LNG Carriers (including five newbuldings) with a contract coverage of 76% in 2017 and an average minimum back-log per contracted vessel of ~5.5 years. Although the secured cash-flow enables the company to pay dividends even at the trough (current annualized dividend yield at 8%), it also equates to less operational leverage at what we believe to be the expansionary point in the cycle from mid-’17. In addition, GasLog is exploring possibilities within the booming FSRU segment, and has an attractive source of financing trough its MLP (at least in the current environment of low interest rates). We find low risk and great valuation in GasLog and initiate coverage with a BUY recommendation and TP of USD 18.

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Dry Bulk Appendix

As a response to popular demand, we have compiled a couple of asset specific slides as an appendix to our Dry Bulk: Sector Update from 4 April 2017.  Disclaimer: The publisher currently owns shares in EGLE-US…

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FLNG-NO: Initiation (BUY, TP 17)

We initiate coverage of Flex LNG with a BUY recommendation and target price of NOK 17.

The company has no vessels on the water in the current trough, but four MEGI LNGC newbuildings scheduled for delivery in 2018. Given our view that the trough is finally coming to an end in 2q17 and that the expansionary phase of the cycle is imminent, we find the setup of Flex extremely attractive. Adding the strong sponsor in Mr Fredriksen, we see additional upside from future accretive deals and positive bias from investment banker analysts.

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SHIP-US: Initiation (BUY, TP 1.25)

We initiate coverage of Seanergy Maritime with a BUY recommendation and target price of USD 1.25.

The company has made some very attractive acquisitions at the bottom of the cycle, one example being the two 2010-built Korean Capes which have appreciated ~60% since the deal was announced six months ago.

We see recent equity issuances as accretive given the appreciation of asset prices. However, we believe a discount on the company vs peers is just given several factors; including the At-The-Market (ATM) program, recent fee structure, the class A Warrants and share illiquidity.

Valuation: Our target price of USD 1.25/sh is based on a NAV of USD 0.94/sh, but added value from the optionality of a further 10% increase in asset values which would equate to a NAV of 1.67/sh, and applying a 25% discount. The implied asset value elasticity of NAV is 79% in our calculations, which is attractive given our view of rising asset prices, but equally sensitive on the downside… We recommend the less risk averse investor to BUY the share.

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Dry Bulk: Sector Update

The first quarter of the year definitely surprised on the upside in terms of seasonally high earnings and rising asset prices. The latter is natural when considering that most listed players have a strong currency in its share price after the recent surge, and we have seen several very accretive shares-for-ships type deals. Although we have a positive view on the dry bulk sector, we are lukewarm to the shares as too much of the cyclical upturn is already priced in. Earnings are lagging with a median EV/EBITDA of 28x in 2017E and 17x in 2018E on our estimates. Thus, we find the current valuation too steep, although with a few company-specific deviations. Any potential fall in share prices could represent an excellent opportunity to buy.

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NE-US: Initiation (BUY, TP 12)

We initiate coverage of Noble Corporation with a BUY recommendation and target price of USD 12

The company has a large fleet of attractive assets, a balanced contract backlog and a decent liquidity position. We believe the company is well positioned to take advantage of the looming expansionary phase of the cycle.

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RDC-US: Initiation (BUY, TP 20)

We initiate coverage of Rowan Companies with a BUY recommendation and target price of USD 20

The company has a fleet of four UDWs and 25 jackups of which only two are currently stacked. The company’s earnings visibility is strong based on the current contract backlog, further supported by the recently announced JV with Saudi Aramco. Add to this a coffer of USD 1.3bn and improving earnings ahead, we deem the company a defensive investment at the trough, but with the a free option on a cyclical recovery.

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ATW-US: Initiation (BUY, TP 19)

We initiate coverage of Atwood Oceanics with a BUY recommendation and target price of USD 19

The company has four modern UDWs/Drillships and five modern Jackups on the water, in addition to an aging Deepwater rig and two UDW newbuildings stacked at DSME until 2019/20 but deliverable at Atwood’s option.

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Posted in Oil services, rig | Tagged , , | 2 Comments

ESV-US: Initiation (BUY, TP 17)

We initiate coverage of Ensco with a BUY recommendation and target price of USD 17

The company has 59 rigs on the water in addition to two deferred newbuildings, a market cap of USD 2.5bn and is on of the most liquid names in the industry. Despite this, we estimate the company is trading at a discount to NAV and an implied 3% discount per rig at current trough levels.

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Posted in Oil services, rig | Tagged , | 2 Comments