Tank Containers leading the strong report
Stolt-Nielsen posted strong 4Q (September-November) figures as Tank Containers and Stolt Sea Farm performance beat our estimates, while other segments reported relatively in-line results. Prior to the report we were stating that repeating 3Q21 results would be an achievement and we can safely say this goal was reached. As the outlook remains positive for the chemical tankers and other segments are very well positioned in the market, we believe the share is still undervalued and reiterate Buy recommendation with an increased NOK 185/sh (NOK 170/sh previously) Target
Price.
Continued strong performance of Tank Containers and Sea Farm
Stolt-Nielsen reported stronger-than-expected figures. The surprise is primarily explained by ~13% higher revenues in Tank Containers segment, driven by an increase in transportation revenue per shipment, reflecting the steep rise in freight cost. Yet, Stolt Tankers segment has recorded lower volumes and higher voyage expenses, reducing the trading margins. Also, the company has reported a USD 10m impairment in Australian terminals, while the other terminal locations continued to perform well. The Stolt Sea Farm segment continued to see high volume and improved sales prices for both turbot and sole. Overall, the company’s revenues including JV came in at USD 602m vs. our expected USD 585m, while adj. EBIT beat our and the market’s expectations and was at USD 93m (USD 62m our, USD 54m consensus projections). Even after the impairments and other adjustments, the EBIT and net profit figures came in line with the previous quarter, thus, on a highly promising scale.
Positive outlook for all segments
Despite the first quarter’s tendency to be seasonally weakest, the company indicated that the initial signs are that volumes and rates in all three logistics businesses are holding or even improving. Tankers’ markets should strengthen, supported by increasing volumes and a slower delivery rate of newbuildings. As for terminals’ segment, higher rates are expected due to increasing utilization. Also, both Stolt Tank Containers and Sea Farms were guided to continue their strong performance in the coming quarters. Sea Farms actually presented very interesting and ambitious growth plans for the land-based Turbot and Sole production, and we have a positive view towards land-based fishing overall. If the segment starts growing as it is aimed to, we speculate that the talks on a possible spin-off should return.
We somewhat increased our estimates and seeing the stable-to-promising outlook for all the segments, believe the share is still undervalued and reiterate Buy recommendation at NOK 185/sh TP.
Source: Norne Research