Clarksons Platou Securities thinks shares in bulker owner Golden Ocean Group are now fairly valued, leading it to downgrade its rating of the stock to “neutral”.
The investment bank had previously designated Golden Ocean’s Oslo and Nasdaq-listed shares as a “buy”, but still expects a strong performance from the shipowner in the months ahead.
“The stock price of Golden Ocean has more than doubled in the year to date, including dividends received, and we believe valuation is now fair, so we change our rating to Neutral from Buy, with an unchanged target price of $15, or about NOK 150 per share,” Clarksons analyst Frode Morkedal and his team said in a research note on Thursday.
“Dividends and China reopening after lockdowns are expected to support the stock, while slower global economic activity and reduced trade inefficiencies pose downside risks.”
Clarksons estimated that Golden Ocean’s current share price implies a 16% increase in ship values or about $77m for a newcastlemax resale, which the firm called “a reasonable valuation”.
Golden Ocean’s shares were trading at NOK 145.55 as of lunchtime in Oslo on Thursday, down 0.78% since the day began.
The stock hit NOK 151 shortly after the market opened and the company published its results for the first quarter.
It beat analysts’ consensus and recorded net income of $125.3m for the three months, up from $23.6m a year earlier.
DNB Markets, which has rated Golden Ocean’s stock as a “buy”, said the shipowner’s “strong” guidance for the second quarter should lead to revisions to estimates and a modest upside to the share price.
“Based on our rate forecasts, we estimate an adjusted Ebitda of $168m for Q2, which compares with a consensus of $133m. Hence, we expected positive estimates revisions on the back of the results with the rate guidance supportive of our estimates,” analysts from the bank said in their initial comments on Thursday.
“The strong Q1 results, a better-than-expected dividend and supportive guidance should in our view warrant a 2% to 4% positive share price reaction in a flat market.”
The analysts added that Golden Ocean should find longer-term positive support from expected GDP growth, fleet inefficiencies and a 30-year low orderbook.
Golden Ocean, the world’s biggest listed owner of capesize bulkers, recorded first-quarter net earnings of $125.3m, up from $23.5m in the same period of 2021.
Revenue from its 94 bulkers jumped to $265m from $158m in healthy dry cargo markets.
Time-charter equivalent (TCE) earnings came in at $24,778 per day for capesizes and $23,693 for panamaxes and ultramaxes during the three months.
Forward coverage for the second quarter stands at 78% of capesize days at $28,300 per day on average, and 77% of panamax days booked at $27,500 per day.
The owner has covered 15% of its capesize days during the third quarter at $38,200 per day and at $34,900 per day 33% of its panamax days.
Golden Ocean also revealed it had signed a new loan agreement worth $275m to refinance 14 capesizes.