- 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 adj. -0.13 vs our forecast of +0.02, after adjusting for a USD 11.4m one-off related to debt repayment
- TP upgraded to USD 2.9/sh (from 2.7)
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. Comparative to recent S&P transactions, we estimate a steel discount of 6-13%. We reiterate our BUY and raise our TP to 157 (153).
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 ratio of a mere 10%. Thus, +/- 10% change in the fleet valuation leaves NAV +/-84% at NOK 23.1/2.1 per share.
We view the share as a good investment for the less risk averse investor, seeking exposure to an oil service behemoth at an entry-point around 40% below recent share purchases by Mr John Fredriksen (17% ownership).
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, Golden Ocean intends to terminate the covenant waivers on the recourse debt in order to facilitate M&A activities and dividends. We reiterate our BUY rating and nudge up our target price to USD 9.7 (9.5).
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 for rates and shares in 4Q17E. Nevertheless, the low supply growth leaves us confident in the continued cyclical recovery over the next two years, and we reiterate our BUY recommendation on the Dry Bulk sector as we view the risk/reward as highly attractive in a historical context.
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 VLCC spot rates as a benchmark, we see average rates of USD 23k/d in 4Q17E with peaks towards USD 32k/d. We see opportunities for the attentive investor in the short term, but believe shares could revert to current levels or below by mid-‘18E, representing the cyclical inflection point. Also taking into account that most share prices have fallen close to our targets; we upgrade the oil tanker sector to HOLD (from SELL) and believe volatility to be key to monetary success for investors over the next six months.