Another abrupt change

The US Trade Representative on 17 April published revised US port fees with significant changes to the initial proposal based on industry feedback. In its current form, the fees will primarily discourage use of Chinese-controlled maritime trade services to the US, and directly affect the use of Chinese-built vessels in US ports (with several considerable exemptions to avoid harm to US trade). The previous broader fees based on fleet composition and share of Chinese-built vessels has been scrappe...

‘The times they are a-changin’

The recurring theme at our 18th Energy & Shipping Conference was geopolitical uncertainty and a potential trade war, warranting a wait-and-see approach, particularly on the Trump 2.0 effect. The consensus view pointed to high asset values, with no rush to the yards, aligning with below-NAV valuations across most of our coverage. However, panellists generally saw less downside risk than the 25% average discount to steel for our Tanker, Dry Bulk and Gas coverage. Overall, the day highlighted uncer...

A playbook on US tariffs

As a response to recent news flow of potential tariffs and countermeasures, we highlight the main implications for the shipping sectors we cover. While the specifics remain uncertain, the below input might assist in gauging potential impacts of the disruptions.

AMSC ASA (No_rec, TP: NOK) - Discontinuing coverage

We have discontinued coverage of AMSC. Our last published recommendation, target price and estimates should no longer be relied upon.

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...

AMSC ASA (Hold, TP: NOK23.30) - Set to be a derivative of Solstad

While AMSC is likely set to be a derivative of Solstad NewCo in the near term, we believe the platform from which it can make new, accretive deals has strengthened. AMSC is well capitalised for possible new ventures, and would diversify its offshore exposure through its potential stake in Solstad’s high-quality fleet of offshore support vessels. Any upside to NewCo’s value would benefit AMSC, while we await AMSC’s next move and finalisation of the Solstad transaction. We reiterate our HOLD but h...

AMSC ASA (Hold, TP: NOK47.50) - Waiting for EGM approval

We believe the sale of its Jones Act tanker fleet is likely to be approved at September’s EGM, which would result in NOK37/share in cash to the company, prompting a considerable dividend and still leaving a sizeable ‘war chest’ for future projects with a newfound flexibility in AMSC’s post-Jones Act era. As we identify the opportunities and await the conclusion, we have downgraded to HOLD (BUY) and cut our target price to NOK47.5 (52).

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AMSC ASA (Buy, TP: NOK52.00) - Offloading tankers for USD747m

Today’s announcement that AMSC has agreed to sell its Jones Act tanker fleet for USD747m looks reasonable to us given a limited pool of potential buyers and the recent equity valuation. AMSC intends to pay a one-off DPS of ~NOK25 post-transaction close (which it expects by end-October), and we believe the deal would defend a ~NOK48–49/share value. However, for AMSC as a going concern the transaction would remove the current asset and counterparty diversification and leave pro forma operations su...

AMSC ASA Minor model adjustments

We have updated our estimates ahead of the Q2 results (due at 07:00 CET on 23 August), owing to increased interest rates and other minor modelling adjustments. AMSC is trading at a 12.1% run-rate dividend yield, an attractive return despite interest rate headwinds. The risk/reward still appears skewed to the upside, as we do not believe the market has fully accounted for the higher distribution capacity from Normand Maximus’s ~USD30m (p.a.) EBITDA contribution. As we forecast quarterly dividends...

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AMSC ASA (Buy, TP: NOK55.00) - Crystallised cash flows

Rising interest rates have weighed on dividend-yielding stocks in recent months. Still, we see favourable risk/reward dynamics in AMSC, as we do not believe the market has accounted accurately for the higher dividend capacity from Normand Maximus’ EBITDA contribution of USD30m per year, which we calculate sees the stock trading at a 2024–2025e yield of 16%. We reiterate our BUY but have trimmed our target price to NOK55 (56).

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AMSC ASA (Buy, TP: NOK56.00) - c16% 2023–2025e dividend yield

c16% 2023–2025e dividend yield We have trimmed our estimates to reflect AMSC’s floating interest rate exposure. Our assumptions still imply a 2023–2025e dividend yield of c16% (current run-rate of 12.9%), versus the historical c11%. We reiterate our BUY but have cut our target price to NOK56 (58).

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.

AMSC ASA (Buy, TP: NOK58.00) - Still meaningful upside potential

Q4 EBITDA was broadly in line with consensus and, as in previous quarters, the company proposed a USD0.12 DPS (c11% run-rate yield). Although it did not guide for a higher near-term dividend, we still expect an increase from Q1. We have lowered estimates somewhat but believe 2023–2024e yields of c14% are still attractive. We reiterate our BUY but have trimmed our target price to NOK58 (59).

AMSC ASA (Buy, TP: NOK59.00) - More dividends on the horizon

We forecast an increase in dividends from Q1, boosting the implied run-rate dividend yield from 11% to 14%, and further to 16% for 2024e. We are focused on whether AMSC can provide colour on future dividend increases, as the Normand Maximus is set to generate sizeable returns from an estimated cUSD30m annual EBITDA contribution from Q4e. AMSC’s legacy Jones Act tankers have also been contracted until at least 2026, which should provide firm cash flows to support dividend payments. We reiterate o...

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