MPC Container Ships (Sell, TP: NOK19.00) - High rates, but overinflate...

The strong freight market has allowed for attractive TC fixtures for MPCC, but rates are now slipping. We still believe the container market is set for years with soft markets on only 6% volume growth YTD versus 2019, but with a c30% increase in the fleet capacity. Thus, while we continue to assume solid rates and duration for vessels set to end their contracts until Q3 2025, we find the risk/reward skewed to the downside. We reiterate our SELL, but have raised our target price to NOK19.0 (18.5)...

MPC Container Ships (Sell, TP: NOK18.50) - Hot markets, but overheated...

We have raised our estimates on a read-across from the recent TC contracts and assume all 29 vessels ending their current contracts until Q3 2025 to be fixed at similar levels (average USD20k/day). However, we find the c100% share price appreciation YTD excessive, with risk/reward to the downside as we expect inevitable headwinds for the container market exacerbated by a potential return to the Red Sea. We reiterate our SELL, but have raised our target price to NOK18.5 (16.3).

MPC Container Ships (Sell, TP: NOK16.30) - Stretched valuation

New charters presented MPCC’s potential to add to its backlog at constructive rates in the current healthy freight market raised by disruptions and solid volumes. However, we still find the 80% YTD share price return excessive. We estimate average rates more than 25% above current levels are required for open days until 2026 to justify the current share price, leaving a poor risk/reward, in our view. We reiterate our SELL, but have raised our target price to NOK16.3 (15.7).

MPC Container Ships (Sell, TP: NOK15.70) - Too-optimistic valuation

With the recent share price rise, we find the stock diverging from fundamentals. We believe USD18.5k/day average rates are needed for its open days until end-2026 to defend the current valuation – a rate seen only in 2004–2008 (USD20.3k/day average) except for the post-pandemic boom. With the 17% deliveries planned for 2024–2025e (4% delivered YTD), we believe the valuation looks rich, and have downgraded to SELL (HOLD), but raised our target price to NOK15.7 (14.6) on a stronger than expected f...

Yard response and dry bulk qualms

Our trip to South Korea and China revealed Chinese shipbuilders are seeking growth to take on Korea’s established yards who are facing constraints. An eagerness to add capacity is one of our takeaways, as well as a gloomy outlook for Chinese real estate, which in our view should inevitably weigh on dry bulk demand.

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...

MPC Container Ships (Hold, TP: NOK14.60) - Substantiated sell-off

MPCC’s 2024 guidance disappointed, and we expect the same issues to weigh on 2025 expectations, where we are ~23% below consensus EBITDA. Hence, we have lowered our estimate for the remaining DPS to NOK3.9, leaving material residual risk to a still-unappealing sector outlook. We reiterate our HOLD, but have cut our target price to NOK14.6 (15.0).

MPC Container Ships (Hold, TP: NOK15.00) - Conflict boosting its risk ...

Increasing Red Sea tensions have seen feeder rates and durations improve materially versus pre-conflict levels, which we believe de-risks MPCC’s charter backlog and solidifies the NOK5.7/share we model the company has left in its dividend ‘cannon’. We remain cautious on the long-term fundamentals of the wider container space and subsequent cascading to the intraregional trades, but consider MPCC’s earnings potential improved for the time being. We reiterate our HOLD, but have raised our target p...

MPC Container Ships (Hold, TP: NOK14.70) - Fairly valued after sell-of...

The share price decline in recent weeks now leaves limited downside potential in our view. Rather, the company is leveraging its strong position to navigate the market downturn through contract extensions and vessel sales. Despite sales implying more downside to current broker quotes, we see potential to capitalise on what we view as still-attractive values, in order to bring forward cash flows ahead of a bleak sector outlook. We have upgraded MPC Container Ships to HOLD (SELL), but reiterate ou...

Decisive hit from weaker macro

Deteriorating macroeconomics and concerns about an impending recession have added to an already-grim outlook. The 2023 demand setback is polarising supply and demand as the towering orderbook pushes 2023–2026e supply growth towards 7% p.a. with demand set to be closer to 2%. Hence, utilisation should fall to record-lows, fuelling a race to the bottom for rates. The ensuing industry-wide cash burn looks set to decimate sector balance sheets. With no bright spots on the horizon, we reiterate our S...

MPC Container Ships (Sell, TP: NOK17.00) - Rightfully more cautious

Management has adopted a more cautious approach to a still-deteriorating container market, with no event-driven distributions announced despite the latest sales and redeliveries. Rather, cash proceeds will likely be directed towards reducing debt and its capex programme. With the guidance fundamentally unchanged in the recent update, potentially leaving downside to consensus, we remain reluctant to factor in too much optimism beyond the backlog, and believe remaining recurring DPS should amount ...

MPC Container Ships (Sell, TP: NOK17.00) - Too optimistic at ~NOK20/sh...

MPCC has kept busy with portfolio optimisation measures since Q1, but in our view has been adding exposure in a falling market. TC rates are back to their lowest levels since November 2020, and durations are coming down, while liners are feeling pressure to cut back capacity to slow rate deterioration. In the coming quarters, we expect mass deliveries and cascading effects, unwinding congestion, slow demand, and, eventually, a return of idling – all pressuring the non-operating owners. We believ...

MPC Container Ships (Hold, TP: NOK19.30) - Maintaining the status quo

Although the Q1 results were broadly in line with expectations, MPC Container Ships’ share price jumped over 8% yesterday. We see this as a reaction to positive QTD fixtures and durations maintaining the status quo, but also favourable FX trends, which until yesterday had not been fully reflected in the share price, in our view. Demand indicators are still down YTD, which should continue to weigh on the sector’s valuation as we see no respite any time soon. However, we see the stock as fairly va...

MPC Container Ships (Hold, TP: NOK17.58) - Fleeting gains

The rapid rate deterioration has temporarily stalled, supported by what we view as synthetic supply responses to be regarded with caution in light of a bleak macroeconomic backdrop and an amassing supply outlook increasing the rechartering risk for MPC’s vessels exposed to highly operationally levered operators. We are broadly in line with the guidance for 2023e EBITDA, allowing a NOK6/share dividend capacity (36% direct yield), although we believe the risk remains on the residual. We reiterate ...

Northern Lights

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.

MPC Container Ships (Hold, TP: NOK18.70) - In line with 2023 EBITDA gu...

Our 2023 EBITDA estimate is in line with MPCC’s new 2023 guidance mid-point. Our estimate leads to a cNOK6/share dividend capacity for the year, implying an attractive yield on continued operations. More value can be harvested from MPCC’s NOK36/share NAV, but the investment thesis is still clouded by residual risk to an unappealing sector exposure. We reiterate our HOLD but have raised our target price to NOK18.7 (18.4).

Northern Lights

Record lows straight ahead

The eventual delivery of a towering orderbook currently at ~30% of the fleet has been in the offing for some time. Still, the implications of the resulting oversupply could be overwhelming for several of the stakeholders in the industry as we foresee record-low utilisation by 2024e. We believe once-strong balance sheets will be tested in order to find an equilibrium and the lowest-cost providers will be the ones left standing, with a 5% annual demand boost needed to even the balance by 2026e. We...

MPC Container Ships (Buy, TP: NOK20.60) - Short durations up ‘spot’ ex...

Following the Q3 results, we have lowered our adj. 2023e EBITDA by 3.3% as recent fixtures showed shorter durations, leaving the company exposed to the rapidly deteriorating freight markets. Approximately 12 of its vessels could become available before end-H1 2023, and as feeder rates continue to drop, we now model for shorter durations, translating into forecast earnings being less isolated to the downturn. We reiterate our BUY and have increased our target price to NOK20.6 (19.2).