Dorian LPG (Buy, TP: USD52.00) - Appealing VLGC exposure
We expect the robust VLGC freight market to persist due to solid US production and exports (up 7% and 17% YTD YOY), fuelling the arbitrage, with the longevity of the cycle backed by slowing vessel deliveries in the next two years. Hence, we see upside potential to our USD45k/day spot rate for the next four quarters (for a 9% earnings yield). Increasing our spot rate equal to the arbitrage for the next two quarters and then to the 1-year TC rate, we calculate a 20% yield for the same period. We have upgraded to BUY and raised our target price to USD52.0 (48.1).
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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