Teekay Tankers (Buy, TP: USD73.00) - Mid-sized tankers outperforming
Given the relative outperformance of mid-sized tanker earnings over the past few months, Teekay Tankers screens as ideally positioned among its tanker peers, with Suezmax and Aframax rates at ~USD50k/day and LR2 rates inching towards more than USD100k/day. This compares to its FCF breakeven of ~USD16k/day, illustrating sizeable cash generation at current levels. Hence, risk/reward looks skewed to the upside, with -9% leverage, 0.85x P/NAV, high operational leverage, and lower residual risk beyond the incoming multi-year upcycle we forecast for tankers. We reiterate our BUY and have raised our target price to USD73 (65).
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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