Belships will report next Tuesday. We are in line with consensus and anticipate slightly weaker results QoQ, but the drop in rates during the quarter should be offset by contract portfolio. And now even this drop in rates diminished with the end of 1Q, signalling that Belships should not encounter any dramatic situation after their contracts are complete, while the long-term outlook is very favourable for the segment. Thus, we decided to upgrade our recommendation back to Buy at NOK 25/sh Target Price.
Slower spot market in 1Q23
When the contract portfolio does not cover only less than a quarter of vessels, the softening spot market during 1Q23 does not have such a dramatic impact on the results. Both we and consensus anticipate slightly weaker EBITDA and EBIT figures QoQ, still a solid bottom line to be announced next Tuesday. What is very favourable is that the spot market recovered towards the end of 1Q and has been stable for a couple of months. With normal seasonality, it is likely the rates to increase in the second half of the year further, while other market reports suggest a flattish movement, which would still put the rates above the breakeven level for the company.
Long-term projections are favourable
The slowly but still expanding economic activity in China has led to increased demand for iron ore, coal and minor bulks in various sectors internally. Soybean harvest from Brazil is behind schedule but estimated to reach record numbers. On the other hand, we have the war in Ukraine, high inflation and interest rates. Still, the long-term vessel supply situation is very favourable with currently publicly quoted historically low orderbook for drybulks and increasing newbuilding prices.
One more vessel acquired
Belships has entered into agreement for the acquisition of one new 64,000 Ultramax bulk carrier which is being constructed at a Japanese shipyard. Delivery of the vessel is expected within Q4 2025 to Q1 2026.
We raise the Target Price to NOK 25/sh and upgrade the recommendation to Buy as there are more signs of the direction north rather than south.
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Source: Norne Research