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Norne: Sustainability expected after a turnaround in 3Q for Epic Gas

Friday, 08 February 2019 | 12:00

Epic Gas is reporting 4Q18 results next Thursday. We anticipate the company to keep up with its rather impressive 3Q18 results and stay above the breakeven bottom line. Our estimates had only minor adjustments before the report as no major news were announced, while market rate information did not point straight to any direction. Long term outlook remains positive due to bright vessel supply/LPG demand future expectations and so does our view towards the stock at an unchanged NOK 15/sh Target Price.

Strong figures expected to be maintained

After posting strong 3Q18 figures with bottom line finally in the positive territory, Epic Gas has set the bar for themselves rather high and we anticipate the company to keep up with expectations in 4Q18 report. No growth in revenues is projected by us (USD 40.7m vs. USD 40.8m in 3Q) due to Christmas holiday season and slowing down market activity, but record-high net earnings are awaited, after the company successfully refinanced its debt and reduced interest expenses. Somewhat declined oil price should add up to the picture positively by a reduction in bunker costs.

No changes in outlook and view on IMO-2020 projected

During the quarter we did not encounter any new information to hold us back from a positive vessel supply / LPG demand outlook. Although there were some newbuilds ordered, Epic Gas reported 4 vessels scrapped worldwide during 4Q. Global Seaborne Tonne-Mile demand was last forecasted to add over 6% in 2019, while the number of available vessels is expected to even decline a bit. As for IMO-2020, we expect Epic Gas to go along with most shipping companies and not to install scrubbers on operated vessels.

Buy reiterated at unchanged TP ahead of report

After seeing the impressive improvement in 3Q18, we anticipate strong results to continue, although slowed down by Christmas holiday season. Our Buy recommendation is reiterated at an unchanged NOK 15/sh Target Price.
Source: Norne Research

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