SFL Corporation Ltd (Hold, TP: USD11.00) - Yield valuation challenged
SFL has managed to secure short-term employment for its Hercules rig, while we believe further upside potential could be unlocked through longer-term contracts from end-2023e, supporting our 2024e EBITDA of USD550m. However, we find elevated interest rates challenging the yield valuation, with increased return requirements, and have raised our estimated yield from 8% to 11%. We maintain our quarterly dividend forecast but see potential for a hike longer-term on a strong Offshore outlook. We have downgraded to HOLD (BUY) and reduced our target price to USD11.0 (13.5).
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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