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Stolt-Nielsen: Bright lights still ahead

Monday, 25 January 2021 | 01:00

Stolt-Nielsen issues its 4Q20 (September-November) results next Thursday being the usual Canary in the Coal Mine. We anticipate figures to be solid seeing the Chemical Tanker sector as one of the winners in the time of pandemic. We moderately expect the quarter to be more comparable to 2Q20 numbers suggesting that 3Q was exceptionally strong, but even repeating 2Q would be a success in our view. The long-term view was strengthened following the JV with John T Essberger, while the stock reacted positively to the news on Stolt Sea Farm exploring possible IPO. We raised our TP to NOK 150/sh keeping Buy recommendation for the stock.

Repeating 2Q20 would be a success in our view

Chemical Tankers still seem to be little impacted by the Covid-19 and shippers are coming out as winners with increased cargo of packaging and healthcare more than offsetting auto and construction related products. Thus, we anticipate a solid 4Q20 figures to be reported next week by Stolt-Nielsen. An outstanding 3Q might not be repeated, but we would value the quarter as successful if 2Q20 figures would be reached. We expect NOK 127m in EBITDA and NOK 53m in EBIT, while the bottom line is projected at NOK 16m.

Stolt Tankers and John T Essberger announced Joint Venture

Stolt Tankers has entered into a joint venture with the John T Essberger Group for the operation of their combined parcel tanker fleets trading within Europe. The combined fleet would consist of 48 vessels (34 tankers belonging to JTE) ranging in size from 2,800 to 11,300 dwt. The new JV is called E&S Tankers and the mutual operations had to start on January 1st this year.

Stolt Sea Farm exploring a possible IPO

The biggest news recently was an official announcement that Stolt Sea Farm has engaged financial advisers to explore a potential listing in Oslo during 2021. SSF specializes in turbot and sole production and provided ambitious growth expectations – going from 7,270 tonnes of production annually to 9,600 tonnes by 2025 and 23,300 tonnes by 2035. Using EV/EBITDA multiple of 10 for the segment we arrive at the value of around NOK 950m with estimates for 2021 (NOK 16/sh), but if we take the strong growth by 2035 into account, the discounted value stands at NOK 1.25bn (NOK 21/sh), which is roughly equal to the last reported asset value of SSF. While we saw talks in the media of NOK 3bn+ valuation, we suggest that anything past NOK 1.25bn value would count as a successful spin-off.

Buy is reiterated with a TP of NOK 150/sh (NOK 120/sh previously), while our eyes were raised from just the quarterly results to the IPO value of SSF.
Source: Norne Research

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