We believe the risk/reward in Dorian LPG screens attractively on solid market prospects, with limited 4% annualised deliveries for the next six quarters, and demand growth support from close to a 40% increase in US terminal capacity by 2026. Thus, we see potential for a tight market, and shipowners to capture its historical share of the arbitrage, currently implying USD60k/day for 2025e. Applying this as our spot rate estimate results in a 23% earnings yield for 2025e. We reiterate our BUY but h...
We have updated our estimates, reflecting the Q2 report, Q3 QTD fixtures and other minor adjustments. We remain positive on the outlook for the VLGC market, with upside potential to current rates on a still-healthy USD120k/day arbitrage and limited 3% supply growth in 2025e. The current ‘irregular’ DPS of USD1.0 equates to a healthy 14% run-rate dividend yield, with further upside potential if shipowners’ share of the arbitrage returns to historical levels. Applying the current USD60k/day arbitr...
Short Shots is a collection of technically vulnerable charts culled from the Negative Inflecting and Toppy columns within our Weekly Compass report or from various technical screening processes. The charts contained in this report have developed concerning technical patterns that suggest further price deterioration is likely. For these reasons Short Shots can also be a great source of ideas for investors interested in short-selling candidates.
We see the possibility of negative near-term news flow on soft VLGC headline rates and the potential for reduced utilisation. However, we are positive medium-term, with solid US-FE arbitrage (average USD72k/day in calendar 2025) and limited vessel deliveries over the next seven quarters (~4% annualised), leaving solid upside potential to rates. By using the arbitrage as our spot rate for 2025e, we calculate a 23% earnings yield. We reiterate our BUY, but have cut our target price to USD40 (51).
We believe the soft VLGC spot market will rebound, with demonstrated US terminal capacity to ramp up exports, raising vessel demand and improving the shipowner’s ability to capture more of the ~USD110k/day arbitrage. Thus, limited deliveries (4% of fleet by end-2025) should offer solid earnings potential, in our view, presented by a 12% yield for Dorian on the 1-year TC. We reiterate our BUY but have cut our target price to USD51 (52).
We expect the robust VLGC freight market to persist due to solid US production and exports (up 7% and 17% YTD YOY), fuelling the arbitrage, with the longevity of the cycle backed by slowing vessel deliveries in the next two years. Hence, we see upside potential to our USD45k/day spot rate for the next four quarters (for a 9% earnings yield). Increasing our spot rate equal to the arbitrage for the next two quarters and then to the 1-year TC rate, we calculate a 20% yield for the same period. We h...
The VLGC freight market has remained firm in recent weeks, supported by US inventories fuelling arbitrage, implying cUSD110k/day. As deliveries are set to slow, with just 29 vessels due until end-H1 2026 (40 in 2023), we see upside potential to our 2025–2026e average spot rate of USD44k/day. On the FFA curve, we calculate a c14% earnings yield, potentially allowing for an increased DPS. Despite the solid market outlook, we find the valuation fair at a P/NAV of 1.14x, and reiterate our HOLD, but ...
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...
Solid US fundamentals with inventories c14% above the 5-year average have kept rates above USD50k/day, and with an outlook for a slowdown in VLGC deliveries, we see strong earnings potential for 2024. Hence, we see upside potential to the USD1.0 ‘irregular’ quarterly DPS and calculate a c14% run-rate earnings yield for the next four quarters on today’s FFAs and 1-year TC rates. Despite a solid market outlook, we find the valuation fair at a P/NAV of 1.15x. We reiterate our HOLD but have raised o...
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.
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...
The US–Far East arbitrage has been under mounting pressure from a weather-related price spike in the US and a somewhat concerning drop in Far East prices. Accounting for today’s fuel, canal and terminal costs, we believe the arbitrage for shipping is currently closed. Hence, we expect the anticipated rebound in VLGC spot rates to be pushed out in time, while we still forecast the outlook for warmer weather in the US to support the arbitrage going forward. We reiterate our HOLD, but have lowered ...
The VLGC freight market has seen a significant decline recently, with solid draws on US propane inventory last week during the cold spell. However, we believe the forecast for warmer weather should keep inventories above the 5-year average and thus aid the US-Far East arbitrage, which currently implies rates of cUSD60k/day, well above spot rates. The latest dividend represents a modest c10% dividend yield, despite an earnings yield of c18% for its Q3 2024–Q2 2025 allowing for more. We have raise...
News of abnormally low temperatures in the days ahead could see US domestic propane demand tailwinds shift to headwinds and potentially threaten LPG exports, as we believe inventory levels could be tested. The US–Far East arbitrage has narrowed from USD380/tonne to USD200/tonne and spot rates are starting to slip as we head into the low season. While the fundamentals still look appealing to us in the medium and long term, we find considerable risk of negative momentum in freight markets based on...
Two Directors at Dorian LPG Ltd sold 15,000 shares at between 43.250USD and 44.500USD. The significance rating of the trade was 57/100. 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 l...
The announcement of a reduction in Panama Canal transits to 18 slots (from a recent average of 32) from February 2024 has reinforced an already strong VLGC market, and, together with the FFA surging to a USD90k/day for VLGC freight rates in 2024, mean we expect Dorian spot rates to average USD71k/day in 2024. We estimate ~USD13/share cash flow over the next 12 months, implying potential for solid dividends and a potential 35% yield. We reiterate our BUY and have raised our target price to USD43....
Bullish Breadth Divergences Persist The S&P 500 is just below 4165-4200 support, and the Nasdaq 100 (QQQ) is just below $350-$355 support. Given they were only 1%-1.5% below these supports at last week's lows, we cannot call them "decisive" breakdowns quite yet. Regardless, these levels are now resistance (in addition to the 200-day MA on SPX), and they are important lines-in-the-sand moving forward. We cannot be bullish if the SPX and QQQ are below the aforementioned levels, but it would be bu...
The VLGC market has gone from strength to strength in a year that looked set to be hit by a daunting delivery schedule. Although we are not yet out of the woods, the market’s underlying vigour is building confidence in lasting returns, most notably from elevated US inventory, promising export growth and attractive arbitrage. Current forward FFAs are highly supportive for asset valuations, and we expect VLGC values to increase. Hence, we believe the VLGC equities at ~1.0x EV/GAV represent attract...
Dorian LPG is still catering to investor demand, with its consistent irregular dividend supporting the current valuation. The VLGC market remains hot, and current FFAs for its fiscal year 2024 indicate the potential for USD5/share on top of our estimates. However, US rig count continues to fall (down 15% YTD), while propane stocks have been supported by unusually low domestic demand YTD, with more than half the 2024 orderbook due to hit the water in H2. We reiterate our HOLD, but have raised our...
VLGC freight rate momentum in 2023 has been supported by a wide arbitrage on abundant US propane inventories, and the current FFA implies cUSD5.5/share (20% of market cap) of added cash flow on our fiscal 2025e and 2026e. This contrasts with our view of potential downside risk to 2024 markets on a staggering 2023 delivery schedule and US export growth risk. The current 0.9x EV/GAV valuation implies near record-high second-hand prices and we therefore see a balanced risk/reward from here. Thus, w...
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