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...

Hunter Group (No_rec, TP: NOK) - Discontinuing coverage

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

OPEC headwinds into low season

Saudi Arabia has added to softening tanker markets with an additional 1mbpd cut until at least July, while voluntary cuts have been extended until end-2024. This means less tanker demand (~2% in aggregate, ~3% for VLCCs) and should weigh on near-term earnings potential for tanker stocks. However, we still find current valuations and the long-term backdrop of limited supply growth and steadily improving oil demand appealing for the outlook into the winter and beyond.

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.

Northern Lights

Hunter Group (Hold, TP: NOK1.87) - Cashing in the NAV

Hunter Group proposed a new NOK0.04/share dividend prior to market open today, adding to the previously announced NOK1.8/share DPS, which in sum (NOK1.84/share) remains slightly below our NAV estimate of NOK1.87/share, including updated cash-flow estimates and FX. The company gave no mention of future projects, so the investment case still hinges on the remaining intrinsic value. We reiterate our HOLD, but have cut our target price to NOK1.87 (2.25).

Hunter Group Minor model adjustments

We have updated our estimates in light of Hunter Group’s updated Q4 guidance and delivery to the new owner of the last vessel in its fleet. Based on the new figures, we calculate an NAV/share of NOK2.34. We do not consider these changes to be material, and we have not changed our HOLD recommendation. We have lowered our target price to NOK2.25 (2.30).

Sector Fast Comment - ABGSC Shipping Daily

Mixed tanker spot rates; Capesize spot turns; VLGC up Capesize spot turns up again; VLGC ticks up Shipping peer group at 0.78x P/NAV

Hunter Group - Terminating coverage

ABGSC terminates coverage of Hunter Group HOLD is our final recommendation NOK 3.7 is our final target price

Sector Fast Comment - ABG Shipping Daily

Tankers down Dry down, LPG up Shipping peer group at 0.8x P/NAV

Sector Fast Comment - ABG Shipping Daily

Spot rates: Crude, dry and LPG down, product up AGAS first take Q2 report Shipping peer group trading at 0.78x P/NAV

Sector Fast Comment - ABG Shipping Daily

Bank holiday on Monday, no spot rate updates LPG now at ~80% discount to LNG Shipping peer group now at a P/NAV of 0.8x

Sector Fast Comment - ABG Shipping daily

Spot rates decline across segments What about crude tankers when the SPR draws stop? ABG Shipping daily product description

Northern Lights

Hunter Group (Hold, TP: NOK2.30) - Three down, one to go

Hunter Group reported Q2 adj. EBITDA 41% below consensus. The limited share-price reaction illustrates that any near-term noise should be overlooked in favour of expected distributions following the delivery of Hunter Freya in Q3, which is set to occur “shortly”. Management stated the remaining intrinsic value will be paid out soon after the vessel’s delivery. We reiterate our HOLD but have cut our target price to NOK2.3 (3.7) after the shares went ex-dividend on 24 August.

Sector Fast Comment - US crude export of 5m bpd

EIA reports US crude export of 5m bpd last week A strong confirmation of our tanker investment case Crude tanker rates currently on the rise

Solid foundations

The elusive tanker market recovery was boosted by events in H1, but has been under way since 2020. With our assumed continued recovery in H2, we now see considerable upside potential for many of the stocks we cover. As the earnings inflection point appears to be nearing, we have upgraded most of them to BUY (HOLD).

Sector Fast Comment - Oil in transit up, US refinery capacity is scarc...

Oil in transit shows unseasonal uptick, up 13% YOY US oil refineries already at high capacity utilisation VLCC rates should come back to life this autumn

Hunter Group - Fleet divested, NAV of NOK 3.73/share

NAV of NOK 3.73/share The future of HUNT is unknown for now Down to HOLD – TP of NOK 3.73 (6.2)