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 25% premium to underlying values, we still see significant downside to the share price given the lackluster outlook for oil tankers. We initiate coverage with a SELL rating and  target price of USD  3.2 (-51%).

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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 in a tight liquidity position on our base case. This, in combination with an asset value elasticity of NAV at 3x leaves us with a pessimistic view on the share price ahead of the cyclical trough. We initiate coverage of Gener8 Maritime with a SELL recommendation and target price of USD  3.8 (-29%).

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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 next cyclical upturn, which we expect to materialize from 2019E. With further fall in asset prices ahead and the consistent share illiquidity factored in, we initiate coverage of Tanker Investments with a SELL recommendation and target price of NOK 33 (-25%).

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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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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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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.

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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 

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