HC Wainwright & Co’s Magnus Fyhr has added two product tanker owners to his coverage universe.
The veteran shipping analyst initiated coverage on Torm and Pyxis Tankers with buy ratings on Tuesday, with a $14 price target for Torm and a $1.50 price target for Pyxis.
He said the duo were posted to take advantage of the expected tanker market recovery in the coming months.
“While the near-term implications from Russian sanctions are likely to have a negative impact on global oil demand and seaborne refined product volumes, the product tanker sector has historically benefited from market disruptions, where inefficiencies and dislocations typically stimulate long-haul trades and ton-mile demand,” Fyhr said in his notes for both companies.
“In addition, we believe structural shifts in the global refinery sector should have positive implications for product tanker demand over the next few years as refinery capacity is being added closer to the well-head and further away from consuming regions.”
He said Torm, with its fleet of 85 ships trading in the spot market, could pay dividends as high as $1.10 per share in 2023 and that every $1,000 in spot rate improvement adds $31m to annual cash flows.
The owner also avoids significant debt maturities until 2025, $172m in cash on hand and is trading at a 35% discount to net asset value, Fyhr said.
Pyxis shares are trading at an even steeper discount, the analyst said, at 63% as its MR tankers are expected to trade at $15,750 per day this year and $18,500 per day next year, above the company’s cash breakeven level of $12,800 per day.
Fyhr also said Pyxis had raised $13m in cash from recent asset sales bolstering its $10m in cash flow, providing it enough liquidity to fund $1.3m in quarterly debt repayments.
In early trading on Tuesday, Pyxis’ New York-listed shares were flat at $0.58, while Torm had jumped a dime to $9.31.
In Copenhagen, where Torm is also traded, its shares had risen DKK 0.35 ($0.05) to DKK 63.50.
