A brewing challenge for the yards

Our 17th Annual Energy & Shipping Conference was well attended by investors and industry executives showcasing the still-growing interest for the sectors. Limited yard capacity is fuelling high newbuilding prices and raising freight rate expectations for the vast fleet renewal necessary in the coming decade. Long lead times underpin a bullish supply story for much of shipping in the coming years, albeit exposed to geopolitical risks affecting trade patterns. Our overall impression was general op...

2020 Bulkers (Hold, TP: NOK150.00) - Balanced return potential

2020 Bulkers’ strong year-end trading returned a ~18% run-rate dividend yield, while we forecast ~12% for 2024–2026, reflecting more balanced risk/reward dynamics. We still see downside risk to Chinese demand and the elevated vessel values, but upside potential from positive supply-side fundamentals. We reiterate our HOLD, but have raised our target price to NOK150 (146).

2020 Bulkers (Hold, TP: NOK146.00) - Share price leaves less on the ta...

The recent performance of 2020 Bulkers’ stock leaves a less-appealing entry point for investors, in our view. While the long-term case of limited supply growth constrained by yard availability and elevated newbuild prices is intact, we believe the excessive dry bulk demand in China for much of 2023 could be challenged in 2024e. With asset values reflective of better markets underpinning the valuations, we find reason to be cautious at these levels. We have downgraded to HOLD (BUY) but raised our...

2020 Bulkers (Buy, TP: NOK130.00) - Substantial distribution capacity

We believe 2020 Bulkers’ ~30% discount to NAV offers a continued attractive entry point into a quality name with substantial dividend power, reflected in the company’s October trading generating shareholder distributions equalling a ~27% annualised yield. While we expect more balanced fundamentals, the stock’s upside optionality remains substantial in our view, and we thus reiterate our BUY and have raised our target price to NOK130 (126).

Burdened by a sluggish economy

We reiterate our BUYs on all our dry bulk names, but catalysts for a marked re-pricing of the stocks now appear further out. In our view, valuation and risk/reward remain attractive, but potential negative earnings revisions and an uncertain outlook should cloud the sector into 2024e. However, we see meaningful upside potential if Chinese growth accelerates and a solid supply side lends support.

2020 Bulkers Minor model adjustments

We have updated our estimates following the Q2 results. Our H2 outlook is now less optimistic as the dry bulk market recovery is still on hold. We believe lacklustre headlines about the Chinese recovery could translate into softer imports and offset a subsequent global demand upturn. However, the fundamentals and valuation remain constructive longer-term, in our view. We do not consider these changes to be material, and we have not changed our BUY recommendation. We have raised our target price ...

Northern Lights

2020 Bulkers (Buy, TP: NOK151.00) - Consistent earner

2020 Bulkers managed to deliver an 8% run-rate yield in a rather soft quarter, which, in addition to trading at 0.85x P/NAV, offers downside protection to a cloudy macro outlook in our opinion, and potential upside on still-strong supply-side fundamentals. However, feeble scrubber premia are working against the 2020 fleet, with H2 set to average just above USD1.0k/day, versus USD6.0k/day a year ago. We reiterate our BUY but have cut our target price to NOK151 (161).

2020 Bulkers Minor model adjustments

We have updated our estimates, owing to 2020 Bulkers’ Q1 actuals, April fixtures and revised fuel spreads. We note that the stock continues to diverge from net asset values and freight rates, and see 2020 Bulkers advantageously discounted at a 0.70x P/NAV, albeit at strong asset values (resale Newcastlemax quotes up 25% YTD). Q2–Q4 FFAs are up 40% YTD to USD21k/day, which on a run-rate basis (including 35% Newcastlemax premium and USD2k/day scrubber benefit) implies a c20% dividend yield capacit...

Northern Lights

Northern Lights

2020 Bulkers (Buy, TP: NOK163.00) - NAV up c50% YTD

We calculate 2020 Bulkers is trading at 0.75x its NAV/share of NOK147, which, on our numbers, is up c50% YTD after a meaningful rise in asset values. The benchmark Q2–Q4 Capesize FFA is up 40% YTD (from USD14.9k/day to USD20.7k/day). In our view, this reflects the long-term prospects for the sector, supported by the record-low orderbook-to-fleet ratio, encouraging demand newsflow from China, and latent upside to ROW imports. We reiterate our BUY and have raised our target price to NOK163 (161).

EM Credit Spark/EM credit weekly update: KMG/Tengiz, Ulker, DP World

EM credit spreads were significantly wider while lower-beta IG names outperformed on the back of the move lower in rates this week. In the near term we expect volatility to remain elevated and would maintain a tactically defensive stance.

Generally an optimistic bunch

DNB hosted its 16th annual Energy & Shipping Conference. On day two, we hosted sector panels and presentations for dry bulk, LPG, car carriers, LNG and tankers with senior management representatives from 29 shipping companies. A resurging Chinese economy coupled with tight supply outlook, strong demand growth potential and regulations putting pressure to remove older vessels were among the common themes. Overall, the discussions showcase optimism across the sectors.

Northern Lights

2020 Bulkers Minor model adjustments

We have updated our estimates for the Q4 results, rate developments, fixed charter coverage, and fuel spreads. We believe 2020 Bulkers’ modern Newcastlemax fleet is well positioned for long-haul demand increases from China reopening and the supply implications of a c7% orderbook-to-fleet ratio. We do not consider these changes to be material, and we have not changed our BUY recommendation. We have raised our target price to NOK161 (155), primarily on favourable FX.

2020 Bulkers (Buy, TP: NOK155.00) - Unlocking latent upside

Our positive outlook is founded on tangible demand catalysts from China reopening and government stimulus to speed up the recovery, plus what we see as exaggerated asset value gloom: 2020 Bulkers’ shares reflect a c10% decline in asset values from, in our view, already fair values considering the constrained delivery profile. We see continued unlocking of latent demand during H1e driving rates up for H2e. We reiterate our BUY but have cut our target price to NOK155 (162).

Sector Fast Comment - ABGSC Shipping Daily

Mixed tanker market, dry bulk and LPG down Shipping peer group trades as P/NAV 0.89x US LPG fundamentals still solid

Sector Fast Comment - ABGSC Shipping Daily

Tankers and LPG up, dry bulk down Shipping peer group trades at P/NAV 0.88x Gas prices indicate floating storage only for Oct-Nov’23

Sector Fast Comment - ABGSC Shipping Daily

Tankers and LPG up, dry bulk down Shipping peer group trades at P/NAV 0.88x Oil tanker sector report: Not enough tankers in ‘24