Himalaya Shipping is an “attractive bet” in the dry bulk segment, according to Pareto Securities.
The Norwegian investment bank has initiated coverage of the Oslo-listed bulker owner with the a “buy” recommendation and a target price of NOK 110 ($10.25).
Tor Olav Troim-backed Himalaya is the most leveraged player in the dry bulk space, according to Pareto.
Himalaya Shipping offers “unmatched levered optionality with 64% LTV and LNG dual-fuel — features we favour heading into an up cycle with a 6% cape orderbook,” analysts August Klemp and Eirik Haavaldsen said in a note published on Friday.
The low order book and a strong start for capesize rates at the beginning of the year could mean that high leverage will pay off.
Himalaya “is a levered bet on this strength to continue”, the analysts said.
Pareto is in line with consensus in 2024 but sees “imminent upside” to first and second quarter estimates before earnings are set to accelerate in the second half of the year as all of Himalaya’s vessels will be delivered and 10 of 12 ships will be index-linked.
“We peg NAV at NOK 100 (assuming LNG dual-fuel at cost of $15m/ship), and see this growing to NOK 110 by year-end 2024,” the analysts said.
The shares were up about 3% in Oslo and traded at about NOK 84 on Friday.
Himalaya has a fleet of twelve scrubber-fitted, LNG dual-fuel newcastlemaxes built in China.
Nine of twelve vessels have been delivered, with the remaining three scheduled for May to June.
“The LNG capabilities have not been utilised too much so far, but with lower prices, the optionality is becoming more relevant. Nonetheless, newbuilding prices are up 40% since Himalaya ordered their ships, highlighting the attractive timing,” Pareto said.
Vessels are mainly on index-linked charters and most of the free cash flow is paid out to shareholders in monthly dividends.
Himalaya, which is dual-listed in Norway and the US, began paying dividends in January.
The shipowner is controlled by Tor Olav Troim, who owns 31.5%.
The market capitalisation is about $350m.
