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.

Odfjell SE Minor model adjustments

We have tweaked our estimates ahead of the Q1 results (due after market close on 7 May), expecting marginally higher costs QOQ from the initial disruption in the Red Sea, and edged up our 2024–2026e revenues. We still forecast strong TCE earnings for Chemical Tankers going forward due to solid fundamentals, further supported by Stolt-Nielsen’s guidance for a 6–8% average increase QOQ in TCE in Q2. Hence, we calculate an average 22% earnings yield for Odfjell for 2024–2025, leaving a 11% dividend...

Odfjell SE: 1 director

A director at Odfjell SE bought 100,000 shares at 119.000NOK and the significance rating of the trade was 67/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last two years clearly ...

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...

Odfjell SE (Buy, TP: NOK185.00) - Top earnings yield potential

The company expects initial effects from the Suez disruption to be higher costs, partly offset by rates. However, we expect the TCE/day for Odfjell to slightly increase for 2024, on current chemical rates c85% above the 10-year mean, added tonne-miles on inefficiencies and a low orderbook-to-fleet ratio of c6%, resulting in a c26% earnings yield for 2024e. Hence, we find Odfjell attractively valued at a 2024–2025e average EV/EBITDA of 3.1x and P/E ratio of 3.8x (broader tanker peer group: 4.2x a...

Odfjell SE (Buy, TP: NOK179.00) - Red Sea tailwinds on rates

A record chemical freight market (c75% above 10-year average), with a low orderbook (c8% of fleet), could create a new normal for rates, and supported by a 20% average rate increase on COA renewals LTM, should result in strong earnings for Chemical Tankers. We see further upside potential from Red Sea disruptions, with product tanker rates poised to react. We find Odfjell attractively valued at a 2024–2025e average EV/EBITDA of 2.9x and P/E of 3.6x versus the broader tanker peer group at 4.5x an...

Odfjell SE (Buy, TP: NOK161.00) - On course for robust earnings

We estimate a marginal decline in rates for Chemical Tankers in Q3, while we believe the effect of previous COA renewals and an appealing fundamental outlook for the segment, with an orderbook-to-fleet ratio of ~7%, should support earnings in the coming years. We calculate an average EV/EBITDA of ~2.5x, and see an average DPS of ~NOK18 for 2024–2025e, representing a solid ~16% dividend yield. We reiterate our BUY and have raised our target price to NOK161 (154).

Odfjell SE Minor model adjustments

We have made minor adjustments to our estimates to reflect the Q2 report, fleet adjustments, and the updated guidance of a slight decline in TCE revenue QOQ. However, we expect the market to bounce back from the macroeconomic headwinds going into 2024, due to the still-attractive supply outlook with an orderbook-to-fleet ratio of c6%. We do not consider these changes to be material, and we have not changed our BUY recommendation. We have raised our target price to NOK154 (147).

Northern Lights

Odfjell SE Minor model adjustments

We have made minor estimate revisions ahead of the Q2 report (due before the market opens on 17 August), to reflect recent market developments for chemical tank shipping. Peers have defied spot market headwinds for chemical shippers, delivering a solid QOQ EBITDA increase; we thus expect slightly better TCE income than the guidance. We do not consider these changes to be material, and we have not changed our BUY recommendation. We have lowered our target price to NOK147 (151), reflecting currenc...

Odfjell SE (Buy, TP: NOK151.00) - Valuation looks attractive

Despite somewhat weaker than expected Q1 results and a softer Q2 outlook, we believe the fundamentals are in place for Odfjell SE to see solid earnings longer-term. Hence, at a 1-year forward EV/EBITDA of 3.6x versus the 5-year average of 5.7x, we find the current valuation attractive. Also, we believe investors should be set for hefty dividends, as we expect the company to return c50% of its market cap over 2023–2025. We reiterate our BUY, but have cut our target price to NOK151 (153).

Northern Lights

Northern Lights

Odfjell SE (Buy, TP: NOK153.00) - Positive rate momentum

Despite softer QOQ expectations for Odfjell Tankers in Q1 on weaker 2023 spot rates at the start of the year, we believe recent renewed momentum for MR and chemical rates should support upcoming COA rate renewals as the company still has ample volumes waiting to be signed. Hence, we continue to see further earnings potential for Odfjell, reflected in our 2023e EBITDA of USD497m (up 30% YOY). We reiterate our BUY and have raised our target price to NOK153 (138).

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.

Odfjell SE (Buy, TP: NOK138.00) - Still-meaningful upside potential

Despite somewhat softer Q4 COA rate renewals than we expected, Odfjell still sees momentum in renewals for the coming quarters, while we believe EU embargo effects should support the company’s spot market exposure (54% of Q4 volumes), as the MR market is starting to strengthen again following the EU embargo. Hence, we have raised our 2023e EBITDA by 6% to USD483m and our target price to NOK138 (124), and reiterate our BUY.

Odfjell SE (Buy, TP: NOK124.00) - Robust market outlook

Chemical Tankers benefited from its spot exposure during 2022, while we believe peak-renewal season for COA volumes should bode well for Odfjell’s earnings potential heading into 2023e as rate renewals are backed by constructive market momentum on the abating swing tonnage and tight supply outlook. Our positive outlook trickles down to a DPS for 2023e of cNOK14 and for 2024e of cNOK13 – returning c32% of its market cap during the period. We reiterate our BUY and have increased our target price t...

Odfjell SE (Buy, TP: NOK109.00) - More earnings set to be unlocked

Odfjell reported another solid quarter as the Tanker fleet benefited from its chemical spot-market exposure. The outlook is for continued strength, as volume displacement effects caused by the impending EU Russian oil products embargo should result in even more favourable terms for product tankers increasing chemical earnings as swing tonnage reduces. Thus, we believe the market outlook could support a total dividend payout for 2022–2024 equivalent to ~40% of the current market cap. We reiterate...

Northern Lights

Odfjell SE (Buy, TP: NOK91.00) - Good market momentum

Ahead of the Q3 report (due after market close on 3 November), we have raised our near-term estimates, putting us 10% above consensus on Q3e EBITDA. We find Odfjell’s tanker fleet in a COA sweet spot, as we expect the segment to capture gains from elevated spot markets, while also securing growth in COA rate renewals on strong market momentum, and in turn earnings to counter a potential macroeconomic slowdown. We reiterate our BUY and have raised our target price slightly to NOK91 (90).