China dry bulk imports continue at solid levels

Himalaya Shipping (Sell, TP: NOK64.00) - On shaky ground into 2025e

We remain sceptical on the longevity of dry bulk shipping demand. We believe the clear imbalance between China’s apparent raw materials demand versus its actual imports poses a considerable risk to the dry bulk investment case, and expect the ensuing correction in freight markets to deteriorate asset value support. Hence, we reiterate our SELL and have trimmed our target price to NOK64 (65).

Much as expected, management remains positive

EBITDA of USD 31m (ABGSCe and cons at USD 30-31m). ~11% downside cons Q4 EBITDA management remains positive. Share to trade flat vs. peers.

Rates up ~70% YTD trumps current weakness

Himalaya Shipping (Sell, TP: NOK67.00) - Markets hinder near-term pote...

Despite Himalaya Shipping now having a fully delivered top-modern fleet, with limited need for further capital investment, we remain concerned about what we view as material headwinds for dry bulk in the months ahead. Moreover, asset values are at 15-year highs and are unsupported by current freight markets. Hence, we find the risk skewed to the downside, with asset values most likely to correct lower. We have downgraded to SELL (HOLD) and cut our target price to NOK67 (91).

A quality fleet at P/NAV 0.74x

Much as expected, management remains positive

EBITDA of USD 24m (ABGSCe and cons at USD 24m). No material news, management remains positive. Share to trade in-line with peers.

Dry bulk market developing as it should

Himalaya Shipping (Hold, TP: NOK91.00) - Fully delivered top modern fl...

Himalaya Shipping’s now fully delivered top modern fleet, with no further investments planned, has it well positioned to distribute excess cash flow to shareholders. However, we maintain our negative view on dry bulk shipping, and believe the downside risks outweigh any upside potential medium-term. We reiterate our HOLD, but have cut our target price to NOK91 (94).

Vermilion Compass: Weekly Equity Strategy

Mixed Signals, Reasons for Caution The S&P 500 uptrend remains intact, and the same can be said for the QQQ's. Despite a positive view of these two metrics, the aspect of of failed U.S. dollar breakdown coupled with the reversal. of the 10-year yields higher does give us pause. The S&P 500 breadth is showing signs of breadth divergence. 1.) The U.S. dollar has staged a false breakdown and is now on the cusp of a reversal. A decisive close through last Friday's close of 104.89 could yet negate t...

Himalaya Shipping (Hold, TP: NOK94.00) - Modern fleet to face softer m...

Himalaya Shipping provides highly leveraged exposure to what we believe are elevated asset values and freight markets set to be challenged by weaker fundamentals. However, its attractive financing and superior modern assets leave it fairly well placed to weather the storm and leverage on the recovery, in our view. We reiterate our HOLD, but have cut our target price to NOK94 (99).

Vermilion Compass: Weekly Equity Strategy

New All-Time Highs Validates Our Bullish Outlook We continue to view the latest pullback to the 100-day MA on the S&P 500 as healthy and normal within the ongoing bull market, and our bullish outlook (since early-November 2023) remains intact. Throughout the last week of April, we discussed the possibility that further downside was limited (4/23/24 Compass) and the mounting evidence that led us to believe the lows were likely in for this pullback (4/30/24 Compass). Market dynamics remain health...

Himalaya Shipping (Hold, TP: NOK99.00) - Set to face market headwinds

We value Himalaya’s top-modern fleet at a NAV of NOK116/share, including our NPV of its LNG dual-fuel, and arrive at a 0.77x P/NAV and 0.9x EV/GAV. With its highly attractive 7-year fixed-rate financing and potential premium earnings from LNG fuel (and scrubbers), we find the company partly shielded from the softer freight markets we expect medium-term. However, due to sector headwinds, we have downgraded to HOLD (BUY), but raised our target price to NOK99 (88).

Vermilion Compass: Weekly Equity Strategy

Are the Lows "In" for this Pullback? While we are not yet out of the woods, we continue to see evidence that suggests the lows may be "in" for this pullback. Last week (4/23/24 Compass) we discussed the possibility that further downside was limited on the S&P 500 due to a multitude of reasons (SPX had simply filled 2/22/24 gap support that we had been discussing since late-February, Russell 2000 and Equal-Weighted S&P 500 were holding above key supports, short-term oversold conditions, subdued ...

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...

Himalaya Shipping (Buy, TP: NOK88.00) - Primed for superior returns

Vessel value and fuel spread tailwinds have raised our NAV to NOK110/share, amid still-strong 2024 prospects, which we believe should lead to superior equity returns given the premium-earning fleet and substantial leverage. We reiterate our BUY and have raised our target price to NOK88 (83).

Himalaya Shipping (Buy, TP: NOK83.00) - Charging full steam ahead

Himalaya Shipping is charging full steam ahead, with strong tailwinds from rising spot and forward rates, solid vessel values, and improving fuel spreads, which has seen its NAV/share rise to NOK99 (0.66x P/NAV). The stock provides potent dry bulk exposure from high financial leverage, while we believe its recent private placement bolsters the balance sheet for potential near-term market headwinds, and should facilitate opening the dividend tap earlier than we expected. We reiterate our BUY and ...

Himalaya Shipping (Buy, TP: NOK70.00) - Ultra-potent dry bulk exposure

Improving dual-fuel economics and rising vessel values have raised Himalaya Shipping’s NAV/share to NOK87, hence pricing in a 40% discount to its implied liquidation value. The stock has become the lowest-valued among its Capesize peers, and offers ultra-potent exposure to the dry bulk space’s favourable supply side fundamentals. We reiterate our BUY and NOK70 target price.

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.