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Stolt-Nielsen: Stable quarter expected with no improvement in chemical tanker rates

Wednesday, 03 October 2018 | 12:00

Stolt-Nielsen posts its 3Q18 report this Thursday. We saw chemical tanker rates remaining low in the quarter, thus expect somewhat stable results with continuously improving Tankers and Containers. As the share price had limited fluctuations during the quarter, our Hold recommendation is reiterated under an unchanged NOK 140/sh Target Price with no significant changes to our model and anticipated start of recovery in rates in 2019.

Seasonally strong quarter with limited projections for Tankers

Despite Chemical Tanker rates staying at their very lows, due to the steady Tanker performance and continuously improving Terminal and Tank Container segments, SNI is anticipated to show similar results QoQ with EBIT in the usual USD 50m range. 2Q and 3Q are the strongest for the company, which is best seen in Tank Containers, the segment that had the strongest-ever last quarter and is forecasted to continue improving, offsetting the still-non-recovered tanker market.

Cautious outlook, not all targets to be reached in the nearest future

During 2Q presentation it was communicated that the outlook for the chemical tanker market remains fundamentally unchanged, despite rising fuel bunker prices. We did not see any improvement in 3Q, but expect some changes in 2019 due to growing demand and limited vessel additions. However, the communicated annual EBITDA of USD 400m for Tankers is not seen reachable in our view in the nearest future. Nevertheless, other targets of USD 150m Terminal EBITDA and USD 100m EBITDA for Tank Containers seem not only realistic, but even rather close.

Hold reiterated with no major changes to estimates

Stock repurchase program has moved a bit forward and the company has less than USD 14m to still be used for further buybacks. The share has moved slightly down after our last update but the drop was limited and we still see it fairly valued. Our Hold recommendation is reiterated with an unchanged NOK 140/sh Target Price after only slight adjustments to our model. Notably, we will be eager to hear more about the newest investment into LNG space during the presentation on Thursday.
Source: Norne Research

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