BW Epic Kosan posts its 1Q22 results next Tuesday. We anticipate a solid period for the company to continue following the gradually slowly increasing shipping rates and expecting little direct impact from the war in Ukraine. Our estimates were minimally adjusted ahead of the report and NOK 25/sh Target Price stays intact, but following the weak share performance lately the recommendation was upgraded from Hold to Buy.

Strong results to continue

BW Epic Kosan has presented very solid adjusted results ever since Epic Gas joined forces with BW Kosan and we anticipate this strong performance to continue in 1Q22 numbers. Similar adjusted QoQ results are projected following the gradually increasing shipping rates offsetting the likely higher bunker costs. We anticipate almost USD 11m in EBIT and USD 6m bottom line to be reported.

War in Ukraine mostly impacts the crew members

In its annual report BW Epic Kosan communicated that 5% of its total crew members are from Ukraine, which would be the only direct impact of the ongoing war to the company. None of the vessels are currently chartered to Russian companies or trade in either Russia or Ukraine.

Promising fundamentals and significantly stronger USD/NOK

2022 was communicated to have begun with good signs for growth in residential LPG demand, increasing Asian and U.S. petrochemical exports and increased activity in European refining and petrochemical plants. It is anticipated that the LPG seaborne trade should grow 2.9% over 2022, while the smaller gas vessel fleet is expected to grow by a lesser figure of 1.9% even before scrapping, translating into a positive earnings momentum. With the significantly increased USD/NOK and little changes to our estimates we keep the Target Price intact at NOK 25/sh, but the lower share price has again created a larger upside for the stock, thus, our recommendation is upgraded to Buy from Hold previously
Source: Norne Research