Energy Morning - 18 February 2025

Solid earnings visibility at 15-23% FCFE yield

Odfjell Technology (Buy, TP: NOK70.00) - Looking for H2 2025 growth

While the stock is attractively valued, we believe the company must create confidence in future growth and bring capex back to normalised levels for the investment case and upside potential to fully unfold. Management was optimistic that the activity uptick and cost cutting will progress in late 2025, helping H2 EBITDA. We see further growth for 2026e from its recently announced powered drill pipe contract. We estimate an equity cash flow yield potential of c12% in 2025, increasing to 17% in 2026. We reiterate our BUY and NOK70 target price.

DOF Group (Buy, TP: NOK135.00) - Nearing refinancing

Q4 EBITDA was 8% below consensus, while cash flow was solid. Net debt has declined to a level where DOF should reach its target leverage ratio of 1.5–2.0x without further deleveraging needed (current NIBD to 2025e EBITDA is 1.8x), with focus shifting to shareholder returns after the expected refinancing is completed. The stock is trading at 2025–2026 EV/EBITDAs of 4.4–3.3x and an annualised DPS yield of 14% from Q2. We reiterate our BUY and NOK135 target price.

Seafood - Norwegian biomass update

Seafood - Norwegian biomass update

AF Gruppen (Sell, TP: NOK120.00) - The ripple effects could be worse

After the Swedish Transport Administration on 19 February stated it was terminating its contract with AF Gruppen for the ongoing E4 Bypass Stockholm project – pointing to contract violations so serious that it intends to file police charges – we have eliminated the order from our backlog and cut our 2025e EPS by c5%. However, if found guilty of the violations in the legal process, we see even greater downside risk that in a worst-case scenario could include the company being excluded from public tenders. We reiterate our SELL and NOK120 target price.