Odfjell posts 4Q21 report on 9th of February. The underlying results in 4Q21 were guided to be in line with 3Q21, but we expect somewhat lower margins due to increasing bunker costs. While the improvement in chemical tanker rates is still awaited, Odfjell invested in expanding its terminal in Houston. We made limited changes to our estimates, anticipate no surprises in the figures and continue to see a significant upside in the share if the rates improve, thus, Buy recommendation under an unchanged NOK 40/sh Target Price is reiterated.

4Q guided in line, somewhat lower margins anticipated

In its last report, Odfjell communicated that although there are signs of improvements in the markets, it will take time for a recovery to materialize and therefore the company expects the underlying results in 4Q21 to be in line with 3Q21. Even with the fourth quarter being seasonally strongest, we increased the bunker cost expectations, this resulting in somewhat lower margins.

Houston Terminal’s expansion planned

Odfjell is expanding its largest and the most important terminal in Houston, strategically located near the entrance of the Houston ship channel that serves as a major international hub for chemical import and export to and from the U.S. The expansion will increase the capacity by approximately 9% to 413,400cbm. The constructions are set to begin during 1Q22 and expected to be completed by the end of 2023. The expansion will be fully financed through an existing credit facility.

Outlook remains promising

The fundamental chemicals demand is anticipated both by us and the company to remain healthy over the upcoming three years and is projected to outgrow the net fleet growth. Increasing oil price signals for the reduced pressure from the swing tonnage vessels as well. Thus, all combined, we still see the significant upside for the stock and reiterate Buy recommendation at an unchanged NOK 40/sh Target Price.

Source: Norne Research