BW Epic Kosan posted solid 4Q21 results this morning, again with record revenues and EBITDA, somewhat higher than we expected, as well as the impairment-adjusted bottom line. However, nothing too exciting was presented and although the outlook remains positive, we will make only limited changes to our estimates and the Target Price is likely to remain unchanged.
Slightly better than anticipated adjusted figures
BW Epic Kosan once again reported the highest-ever USD 95.5m revenues compared to our USD 93.0m estimate and USD 92.3m last quarter. The margins were also slightly higher than anticipated with a Covid-19 related costs of modest USD 0.8m and EBITDA came in at USD 25.7m vs. USD 22.9m our expectations. BW Epic Kosan recognized a provision for vessel impairment on some of its smaller ships in the fleet and a loss on sale of vessels of USD 18.7m combined. Adjusted for this, the bottom line came in at a solid USD 5.0m level vs. USD 3.3m our expectations. The company also communicated to be in the process of changing the accounting standard to IFRS to reduce compliance costs, but the impact should not be material.
Scrapping should offset the fleet supply growth
The further strengthening in the market continues and combined with the fundamentals for 2022 is projected to keep up at least through this year. Covid-19 and inflation are two risks for the global economy, but the supply/demand balance is promising. Currently there are orders for 11/10/4 small gas carriers to be delivered in 2022/23/24, representing a 1.9%/2.4%/0.8% increase in the existing fleet cubic capacity. A scrapping pool of 22 older than 30 years vessels might offset the supply growth. Notably, a majority of smaller newbuilding orders are placed for dual fuel LPG or LNG, while BWEK highlights its operational focus and capital discipline, meaning not glancing to the LNG space. On the demand’s side of the scales, we see the expectations of the 2022 global LPG seaborne trade growth of 3.8%, surpassing even the unadjusted-for-scrapping supply growth projections.
Our estimates will not be changed much following the solid, however, unsurprising report, while recommendation depends on the share price movement.
Full Report
Source: Norne Research