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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).

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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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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.

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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 of -0.12 compares with our +0.02 forecast and consensus’ -0.02. No significant surprises in the report, but we lift our near-term estimates as the company reports 80% of fleet days in 4Q17 locked in at $12.6k/d (vs our $11.3 estimate). Although we see short term downside risk to shares from falling spot rates, significant price depreciation would represent an opportunity to BUY the share. We reiterate our 1y TP of $14/sh.

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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 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)

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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. 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).

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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 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).

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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, 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).

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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 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.

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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 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. 

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