Norwegian shipping stocks had another great year in 2023, spearheading the rise of the Oslo stock exchange.
“What a year 2023 proved to be for shipping equity returns, with VLGC equities leading the pack followed by the tanker names,” Fearnley Securities analysts Oystein Vaagen and Fredrik Dybwad said in an outlook report.
The Oslo Shipping Index increased about 50% last year while the Oslo benchmark advanced only 10%.
Avance Gas was the best-performing stock in Oslo as its shares surged about 150%. Its peer BW LPG rose around 100%.
VLGC stocks have rallied since October, “driven by Panama Canal restrictions, which has increased distances rapidly and helped keep rates at elevated levels”, according to Arctic Securities analyst Kristoffer Barth Skeie, who gives “hold” recommendations for Avance Gas and BW LPG.
“We believe that current elevated earnings are largely contingent on the canal and that risk-reward justifies hold recommendations,” he said.
Frontline’s shares increased 73% in Oslo last year. Several analysts continue to be positive about the stock.
Arctic has a “buy” recommendation with a target price of NOK 275 ($26.55). According to the investment bank, “the market will remain tight, but at the same time, the age profile of the fleet suggests that the contracting pace must increase”.
Barth Skeie said: “We believe there is a prolonged upturn ahead, and Frontline is one of our top choices given its strong track record in capital allocation and the opportunity to invest alongside one of the best shipowners in modern times.”
Cleaves Securities also has Frontline as one of its favourite stocks in the tanker segment.
“We continue to favour oil tanker companies,” Cleaves head of research Peter Michael Christensen said.
“Despite a significant rise in equity prices over the past year-and-a-half, we see further upside. The orderbook-to-fleet ratio is near historical lows, while shipyard lead times remain high.
“Despite lingering global economic uncertainties and substantial geopolitical risks, oil in transit has been record high through 2023, with further growth expected next year. Elevated refinery margins and throughput further contribute to the optimistic outlook.”
Fearnleys also prefers the tanker segment for 2024.
“Heading into the year, we remain the most optimistic on product tankers, with rates signalling positive 1Q revisions, and crude names being more of a [second half of 2024] story through a potential Opec+ reversal,” it said.
“For LPG, as the Panama restrictions potentially are prolonged, there’s upside to street VLGC expectations.”
Fearnleys has Golden Ocean as one of its top dry bulk picks after the stock advanced a modest 15% last year.
Arctic gives a “buy” recommendation with a target price of $12.50, after a “rather disappointing” year for bulkers, “driven by reversal of congestion which effectively resulted in an effective fleet growth of ~5% on average for the year, and for some months the figure was even higher”.
“Consensus estimates are too low, both near term but for the year as a whole. This, combined with modest fleet growth over the next three years, should warrant a repricing through 2024 in our view,” Barth Skeie said.
