DnB Markets - 2020 Bulkers Ltd (2020) 2020 Bulkers Minor model adjustments

Report

DnB Markets

Jørgen Lian

EUR 93.09 For Business Accounts Only

2020 Bulkers Minor model adjustments

2020 Bulkers (2020 NO, Buy) - Minor model adjustments (16 pages)

27/04/2022 1 EN

Underlying

2020 Bulkers Ltd

2020 Bulkers Ltd is a Bermuda-based owner and operator of cargo ships. The Company owns as subsidiaries 2020 Bulkers I Inc and 2020 Bulkers II Inc in Liberia. Entities are parts to shipbuilding contract with New Times Shipbuilding Co. Ltd. for construction and delivery of Newcastlemax dry bulk vessel. The Company's main shareholders comprise Magni Partners and Titan Opportunities Fund.

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BMG9156K1018 Oslo Bors Norway

Provider

DnB Markets

DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.

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Analysts

Jørgen Lian

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A brewing challenge for the yards

Our 17th Annual Energy & Shipping Conference was well attended by investors and industry executives showcasing the still-growing interest for the sectors. Limited yard capacity is fuelling high newbuilding prices and raising freight rate expectations for the vast fleet renewal necessary in the coming decade. Long lead times underpin a bullish supply story for much of shipping in the coming years, albeit exposed to geopolitical risks affecting trade patterns. Our overall impression was general optimism and a constructive long-term outlook for most of the shipping sectors.

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2020 Bulkers (Hold, TP: NOK150.00) - Balanced return potential

2020 Bulkers’ strong year-end trading returned a ~18% run-rate dividend yield, while we forecast ~12% for 2024–2026, reflecting more balanced risk/reward dynamics. We still see downside risk to Chinese demand and the elevated vessel values, but upside potential from positive supply-side fundamentals. We reiterate our HOLD, but have raised our target price to NOK150 (146).

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2020 Bulkers (Hold, TP: NOK146.00) - Share price leaves less on the table

The recent performance of 2020 Bulkers’ stock leaves a less-appealing entry point for investors, in our view. While the long-term case of limited supply growth constrained by yard availability and elevated newbuild prices is intact, we believe the excessive dry bulk demand in China for much of 2023 could be challenged in 2024e. With asset values reflective of better markets underpinning the valuations, we find reason to be cautious at these levels. We have downgraded to HOLD (BUY) but raised our target price to NOK146 (130).

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Steffen Evjen

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Solid NCS production in March

The preliminary Norwegian Offshore Directorate (NOD) production figures for the NCS in March showed strong liquids production of 2,086kboed (~4% above forecast) and gas production of 365mcm/d (broadly in line). Overall production was up 2.7% MOM. On a company level, production was down MOM for most names in February; Aker BP and Equinor were hit by reduced production from Johan Sverdrup, while Vår Energi was hampered by downtime at Fenja.

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This week, we published a Q1 preview on Equinor. We believe its share price upswing since its CMU is mainly attributable to strong performance by its peer group. The stock is trading at a 15% premium to peers, in line with its historical average. In other news, Vår Energi reported Q1 production in line with our estimates, with realised prices slightly above. We expect focus in the full Q1 report (due on 23 April) to be on Balder X and Johan Castberg. Also, according to news sources, Equinor’s challenging Wisting project looks set to move forward.

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2020 Bulkers Minor model adjustments

A brewing challenge for the yards

2020 Bulkers (Hold, TP: NOK150.00) - Balanced return potential

2020 Bulkers (Hold, TP: NOK146.00) - Share price leaves less on the table

Avanza Bank (Hold, TP: SEK257.00) - Understated activity resurgence

Solid NCS production in March

Weekly news, topics & discussion

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