Stolt-Nielsen posts its 1Q (December-February) results this Thursday. We made limited changes to our estimates since our last update and anticipate in-line revenues QoQ, but lower margins. However, what caught the eye during the quarter was breaching the 5% ownership of Odfjell SE line that escalated the merger rumours, nothing firm though. We reiterate our Buy recommendation at an unchanged NOK 185/sh TP ahead of the report.

Back to USD 1/sh annual dividend level

After the last report, Stolt-Nielsen announced of the second payment of USD 0.5/sh dividends, bringing the total annual level to USD 1.0/sh., which is somewhat quicker return than we were previously expecting. As for this quarter, we anticipate similar revenues QoQ to be reported, but the increased bunker costs might lead to lower EBITDA and EBIT.

Speculations on Odfjell

At the beginning of March, Stolt Nielsen had to inform the market of breaching the 5% ownership line of Odfjell SE, sparkling the speculations of a possible takeover or merger. The step down of Odfjell’s CEO just added fuel to the flame. There were talks that Stolt-Nielsen is attracted by Odfjell’s simpler model and that Mr. Niels Stolt-Nielsen is willing to talk merger but Laurence Odfjell is less keen. We can also add the quote from Stolt’s annual report about the development of Stolt Tankers fleet by “acquiring competitors” and we will be not surprised if something happens here. This might lead to previously suggested IPO of Stolt Tankers, but of course the approval from competition authorities is questionable, knowing that Stolt-Nielsen and Odfjell are definite leaders of the sea chemical transportation business. Nevertheless, this is the development we will be following very closely now.

2021 was again harsh, let’s see what 2022 brings

2020 was known as the year of Covid-19, but as the year ended and 2021 began, there was little relief. Covid-19 was still the case, while some negative one-offs like Houston freeze and the blockage of Suez Canal happened. Tank Containers, Terminals and Sea Farm were all holding the front, as the Tanker profits were held down by lower spot rates and deep-sea volumes as swing tonnage from a historically weak product tanker market moved into chemicals. Hopefully, as the oil price jumped, the swing tonnage will be a lesser problem in 2022, but when things like the recent invasion of Ukraine by Russia happens, it is hard to predict anything.

We made limited changes to our estimates prior to the results 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