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Höegh Autoliners ASA - Initiation of coverage - Appealing car carrier exposure The recent listing of Höegh Autoliners marks an excellent opportunity for investors to take part in what we expect to be a multi-year upcycle for a shipping segment exiting a

Höegh Autoliners ASA (HAUTO NO, Buy) - Initiation of coverage - Appealing car carrier exposure The recent listing of Höegh Autoliners marks an excellent opportunity for investors to take part in what we expect to be a multi-year upcycle for a shipping segment exiting a prolonged cyclical downturn. Limited investments mean an ageing fleet and limited fleet growth, while regulations tighten supply further. Coupled with an unclogging of vehicle production and already tighter market fundamentals, we are bullish. We initiate coverage with a BUY and NOK34 target price, as we see 60%+ upside potential from the current share price. Operationally geared car carrier exposure. Höegh Autoliners operates a fleet of 39 car carriers with an average age of 14.5 years and an average size of c6,700 car-equivalent units. It recently raised equity to fund part of its Aurora newbuild programme – the largest, most-efficient and environmentally friendly car carrier ever built. Front-end loaded contract renewals in a strengthening market should serve the company well and provide attractive market exposure for investors. 2022e to be the start of something substantial… We forecast EBITDA of USD278m for 2022e as we expect a 5% rise in volumes and 3% higher rates YOY along with improved trade balances allowing for more-efficient operations and improved margins. The strength looks set to continue to 2023, in our view, as contracts renew with rates reflecting the tightening tonnage situation. …as fundamentals align for a lasting upcycle for car carriers. We expect PCC supply growth to average a modest 1.8% in our 2021–2024 forecast period as the orderbook is negligible before 2024 while regulations should prompt scrapping. This compares to an expected rebound in demand averaging 8.7% over the same period, albeit disguising the 22% demand slump from 2019 to 2020. Initiating coverage with a BUY and NOK34 target price, based on the average of a 5x EV/EBITDA on our 2022 estimates, 1.0x P/B and a 10% dividend yield on our 2022e dividends. Our target price suggests 62% upside potential from the current share price. (68 pages)