Author Archives: Joakim
Teekay Tankers (SELL, USD 0.7): Challenging liquidity position ahead of the cyclical trough. TP revised down from 1.2
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 […]
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%).
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
We initiate coverage of Northern Drilling with a BUY recommendation and target price of NOK 90
All the time Seadrill remains in disarray, Northern Drilling has emerged as the new investment vehicle for Fredriksen ahead of the next cyclical upturn in the rig space. The company currently has two more or less complete semi-sub newbuildings warehoused at HHI, and the main assumption is for delivery in Jan/19.