Cool Company (Buy, TP: NOK185.00) - Attractive newbuild options

We believe the strong markets for fixing vessels longer-term at attractive levels in 2023 should benefit Cool Company, which has vessels available for new charters near-term and two optional newbuilds with 2024 delivery for USD234m each, well below the latest newbuild price of USD260m. While down slightly from last year, we note current broker quotes for 3-year TCs offer c20% upside to our 2024e EBITDA. We reiterate our BUY and have increased our target price to NOK185 (180).

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.

Cool Company (Buy, TP: NOK180.00) - Exciting times ahead

The Q4 report provided limited news on fixtures, but we remain positive on the potential for the company securing an attractive charter for its vessel coming open in September – supported by seasonal tailwinds. We see further upside potential to earnings should the company secure long-term charters for its newbuild options, more than supporting our average 2023–2025e dividend yield of 13% at the current share price. We reiterate our BUY and NOK180 target price.

Cool Company (Buy, TP: NOK180.00) - Substantial dividend potential

Although timecharter markets have softened since November 2022, we see positive earnings potential for two of Cool Company’s vessels that are set to become available near-term, with a reignition of Freeport LNG volumes likely to boost utilisation and support rates. 1-year TFDE timecharter rates have slid from H2 2022 but remain c20% above the 2022 average, which we believe should support contract discussions. Hence, we estimate a 2023e EBITDA of USD336m and cNOK31 DPS. We reiterate our BUY and N...

Bullish despite clouds on horizon

While fundamental shipping demand has deteriorated on volume delays, substantial contracting and shorter sailing distances, the freight market has been buoyed by extraordinary trading economics. We see no reason to expect these extreme arbitrage opportunities to end soon; rather we expect them to continue to support rates despite lower utilisation. However, fundamentals look muted for 2024–2025, before the next wave of liquefaction firms up against steep deliveries. Hence, we remain bullish, but...

Northern Lights

Cool Company (Buy, TP: NOK140.00) - Upside on operational leverage

We find meaningful upside potential to our estimates as the two vessels set to become available soon could be contending for USD140k/day fixtures given the ~USD40k/day disconnect between the spot and 12-month charter market. We estimate a potential 2023 cash boost of ~NOK12/share if the company achieves such rates, which should raise its dividend potential entering 2023. We reiterate our BUY and have raised our target price to NOK140 (116).

Nothern Ligths

Cool Company Minor model adjustments

We have made minor estimate revisions ahead of the Q2 report (due before the market opens on 1 September), given recent developments in the freight market. We remain positive on the underlying sector outlook, supported by elevated arbitrage opportunities going into 2023, but expect some near-term headwinds from the Freeport LNG export disruption. We do not consider these changes to be material, and we have not changed our BUY recommendation. We have raised our target price from NOK107 to NOK116,...

Northern Lights

Cool Company (Buy, TP: NOK107.00) - Appealing charter potential

We have adjusted our 2022e on vessel delivery timing, but raise our 2023e EBITDA by 4% and see potential for USD3.1/share in additional cash (~32% of current market cap) for 2023 if Cool Company can fix its open vessels at the prevailing TFDE timecharter rate of cUSD120k/day. We believe its LNGC market consolidation strategy should bolster share liquidity and the market cap, and we find the company’s fleet well positioned to benefit from increasing LNG volumes long-term. We have reiterated our B...

Cool Company - Initiation of coverage - Pure LNGC market exposure

Cool Company is focused entirely on LNG shipping, and we see meaningful upside potential in a rising LNGC market. Despite headwinds from unrest in eastern Europe, we are positive on the fundamentals and believe the current situation highlights the continued importance of LNG. We find the valuation attractive and initiate coverage with a BUY and NOK94 target price.