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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....
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...
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,...
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...
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...
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...
Posted in oil tankers, shipping
Tagged tanker investments, Teekay Tankers, til, til-no, TNK, tnk-us
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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...
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...
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,...
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...
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...
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...
Posted in oil tankers
Tagged shipping, tanker investments, Teekay Tankers, til, til-no, TNK, tnk-us
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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...
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...
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...
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...
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...
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...
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...
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...
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...
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 […]
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%).
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.
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.
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...
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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Tagged GasLog, GLOG, GLOP, LNG, LNG carriers, LNG tankers, shipping
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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...
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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Tagged Flex LNG, FLNG, FLNGF, LNG, LNG carriers, LNG tankers, shipping
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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.
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.
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.
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.
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.
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.
NODL-NS: Initiation (BUY, TP 90)
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.
BORR-NS: Update (BUY, TP 60[54])
Borr Drilling today announced the LOI to purchase Transocean’s 15 jackups in addition to a USD 800m equity offering. The accretive nature of these corporate events leads us to raise our target price to NOK 60 (from 54). As we highlighted...
SONG-NO: Initiation (BUY, TP 47)
We initiate coverage of Songa Offshore with a BUY recommendation and target price of NOK 47 Songa Offshore has an EV/M.cap of 6.2 (implied 16% equity ratio) and has four modern rigs on long-term contracts to Statoil until 2022/24 (three vintage...
GOGL-US: Acquires 16 vessels (SELL, TP USD 4.2 [4.0])
Golden Ocean today announced the acquisition of 16 dry bulk vessels for a consideration of USD 127m in shares and USD 285m in assumed debt. The acquisition and its funding structure is in our view a “no-brainer” as the shares were...
BORR-NS: Initiation (BUY, TP 54)
We initiate coverage of Borr Drilling with a BUY recommendation and target price of NOK 54 The company is still in its cocoon, and we believe it is about to become a butterfly at an opportune time in the cycle. Recent chatter links...
DSX-US: Initiation (SELL, TP 3.1)
We initiate coverage of Diana Shipping with a SELL recommendation and target price of USD 3.1
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GNK-US: Initiation (Neutral, TP 10.9)
We initiate coverage of Genco Shipping with a Neutral recommendation and target price of USD 10.9
We find the dry cargo space very interesting and believe that the trough was 1Q16. The company is recently restructured, in a sound liquidity position and well placed to take advantage of the ongoing cyclical upturn. We find the share very reasonably priced comparative to steeper valued peers such as GOGL or SBLK, and could be contemplating a rating upgrade if the share price continues to slide.
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EGLE-US: Initiation (Neutral, TP 5.5)
We initiate coverage of Eagle Bulk with a Neutral recommendation and target price of USD 5.5
We find the dry cargo space very interesting and believe that the trough was 1Q16. The share is attractively priced comparative to peers, but we deem its fleet to have strong industrial qualities which is less opportune in the current point of the cycle.
Something that could spark the stagnant and peer-trailing share price into life is further corporate actions (accretive equity issuances & vessel acquisitions) in addition to increased focus from positive investment banker analysts. We do believe the share will outperform peers in the short to medium term, and suggest the hedged dry bulk investor to go long EGLE and short steeper valued peers such as GOGL or SBLK.
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SALT-US: Initiation (Neutral, TP 7.1)
We initiate coverage of Scorpio Bulkers with a Neutral recommendation and target price of USD 7.1 We find the dry cargo space very interesting and believe that the trough was 1Q16. The share is attractively priced comparative to peers, but...
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SBULK-NO: Initiation (Neutral, TP 41)
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SBLK-US: Initiation (SELL, TP 5.2)
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GOGL-US: Initiation (SELL, TP 4.0)
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