Odfjell posted 4Q21 figures last week and ended the challenging year with great fanfare. The chemical tanker market improved in 4Q21 and so did the company’s results, from the highest in ten years top line to the adjusted net profit of USD 10m. The next quarter was guided slightly lower due to seasonality, but the longer-term market outlook remains strong, therefore, we reiterate Buy recommendation for the stock and increase the Target Price to NOK 45/sh from NOK 40/sh previously.
Strong results far from the conservative guidance
4Q21 was guided to be in line with the previous quarter but ended up much stronger, following the improved chemical tanker market, as the pick-up in the U.S. exports occurred together with reduced supply in the region and improved momentum in the CPP market. Revenues incl. JV of USD 285m were the highest in a decade, while EBIT came in at USD 35m compared to
USD -7m last quarter. Net profit, adjusted for USD 6m related to the distribution from Den Norske Krigsforsikring for Skip, USD 1.7m in vessel sales gain and USD -2m revaluation of shares held for sale, came in at USD 10m, while both we and consensus expected a negative result. Odfix index improved during the quarter by 6.5% reaching 128 as derived by our calculations. During the same period Clarksons Chemical tanker spot index improved only by 1.1%.
Terminals safe and steady
The terminals noted another strong quarter with the average commercial occupancy level of 96.1% during the quarter, up from 93.9% in 3Q21 driven by the terminal in Houston, while the occupancy rates in Europe were stated to be 100% and with high activity levels. Revenues were up by USD 2m QoQ, partly explained by the one-off related to insurance proceeds in relation to the OTH fire incident and the Texas freeze. A general positive development in 2022 was guided with a high demand for storage and the elevated activity levels to continue. Furthermore, 1Q22 should mark the start of the construction of the new tank bay in Houston which will increase the local capacity by 9% and should commence operations by end-2023.
Longer-term outlook remains solid, might be slightly weaker 1Q22
Chemical Tanker outlook remains strong. With the lockdown measures easing, the automotive and construction industries are forecasted to improve, leading the chemical tanker demand growth. On the vessel supply side, swing tonnage should ease on higher oil demand, while the chemical tanker orderbook was communicated to remain low. All combined, the chemical tanker demand growth is forecasted to reach an average of 4% between 2021 and 2023, which compares to the supply growth forecast of 1% over the same period. However, due to seasonality, the next quarter should yield slightly lower results. Nevertheless, we believe that the stock remains somewhat undervalued even after the recent gradual growth, thus we reiterate Buy recommendation at NOK 45/sh (NOK 40/sh previously) Target Price.
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Source: Norne Research