DHT Holdings - Despite robust performance DHT’s stock price continues to underperform the broader sector index

The crude tanker market remained volatile in 2022 YTD. The year began on a sluggish note amid the Omicron-led demand concerns and high oil prices, which limited seaborne trade. However, the market dynamics turned favourable for shipowners after the Russia-Ukraine conflict led to high spot TCE rates of mid-sized crude carriers. This supported the uptrend in the Drewry crude tanker equity index that registered a gain of 29.9% between the last week of February and the first week of June. However, DHT’s stock inched up by only 2.9% over the same period. The index declined between the second week of June and the first half of July due to seasonal weakness and normalising spot earnings of mid-sized tankers, especially in the Black Sea and Med before trending upwards again from the second week of July on the back of strong and rising vessel earnings in the spot market. Cumulatively, the index registered a hefty growth of 76.2% YTD. On the other hand, DHT Holdings’ (DHT’s) stock jumped 43.4% YTD primarily on account of the rally in the company’s stock over the past two months, as prospects of a potential recovery in the crude tanker market and surge in VLCC spot TCE rates in the latter half of 3Q22 underpinned a rally in the company’s stocks. Both DHT and the Drewry crude tanker equity index outperformed the S&P 500, which dropped 23.6% since the beginning of the year.

Although the company’s stock has generated a high return of 43.4% YTD, it has underperformed the broader sector index as spot earnings of VLCCs largely remained unaffected by the conflict, and DHT owns and operates a fleet of VLCCs only. The news of political uncertainty in China coupled with fears of a potential recession led to some correction in DHT’s stock price over the past three weeks, but we expect it to trend upwards again in 4Q22 on the back of elevated VLCC earnings and robust seasonal demand. However, a potential global economic
slowdown or recession could be a downside risk for the company.