The year 2020 was supposed to be a party for shipowners, including publicly listed companies and their shares.
But the coronavirus was a nasty party crasher, and it poisoned the punchbowl.
A presumed stock market boom has turned into a wipeout, with New York-listed shipping shares falling 43% in the first half of 2020, according to numbers provided by US investment bank Jefferies.
Each of the five operating sectors under Jefferies' coverage suffered losses of at least 36%, and only one of 30 companies managed to add share value: Dynagas LNG Partners with a robust 79% gain.
Shipping stocks have quickly negated a rare year of appreciation in price, Jefferies lead shipping analyst Randy Giveans told TradeWinds.
“After a banner year in 2019, Covid-19 crashed the party we expected in 2020. Sentiment and fears reigned supreme for the vast majority of the first half.,” Giveans said.
“The fundamentals – improving demand and minimal fleet growth coupled with the positive impacts of IMO 2020 – were attractive earlier this year, but the terrible economic slowdown proved too much to overcome for companies that facilitate global trade.”
Shipping shares fared much worse than broader stock market indices, as the S&P 500 fell only 5% over the period and the Dow Jones Industrial Average falling 9%.
But with sectors like technology and healthcare present in the wider measures, it’s a tough comparison, Giveans noted.
Shipping stocks had done the unusual in 2019, making money for investors. They appreciated an average 49%, with tankers leading the way with a 112% gain.
Tanker owners went on to enjoy record earnings in many cases for the first quarter and will repeat them when numbers are announced for the three months just concluded.
But that didn’t stop them from plummeting 44% year to date, as investors look to already-deflated hire rates and poor expectations for the second half of the year amid a destocking of oil inventories and floating storage.
Dry bulk, on the other hand, has been lifting in the past month off trough-level day rates. But stocks haven’t seen a corresponding boost, shedding 49% of their value.
Investors may be spooked by Covid-19’s continued impact on demand or just the sector’s poor operating performance in recent years.
Containerships were similarly dented with a 48% loss, with only the gas sector performing better: a 39% loss for LPG names and 36% for LNG owners.
Is there any good news? Jefferies seems to think so.
“Despite the equity performance, many companies’ balance sheets are in much better shape than they were in six months ago, especially the tanker owners,” Giveans said.
“Looking ahead, with any improvement in economic activity and a rebound in global trade, we expect these economically sensitive stocks – energy related and driven by global trade – to outperform during the second half.”
The Jefferies analyst offered the following highlights and lowlights for the half-year past and the one beginning Wednesday:
Biggest positive surprise: “Dynagas was the only winner, with all the upside in the second quarter more than offsetting a horrendous first quarter. It’s probably the most insulated company over the next few years as the vast majority of their vessels are on time charters through 2026 and beyond.”
Biggest disappointment: “Scorpio Bulkers’ 76% collapse is the worst of the group, but GasLog’s fall from grace is certainly the most surprising, especially considering the time charter coverage that they have. GasLog is down 72% while GasLog Partner is off 75%, and had lost more than 90% by March. LNG has certainly taken a beating, but the distribution-dividend cuts and a dilutive equity raise really drove the equity underperformance.”
Good things to come: “Continued improvement as more economies open up and more people get back to pre-virus activity, although this will likely be a gradual process. We also expect significant slow steaming and scrapping if day rates remain below breakevens.
“Also well received in the coming months would be attractive debt refinancings, accretive share buybacks, medium-term time charters at healthy rates and further consolidation.”
Giveans’ worries: “Second or third waves of Covid-19, slower-than-expected economic recovery, dilutive equity raises, lack of consolidation and more newbuilding orders all would be negative for companies and shipping as a whole.”
After the Dyngas gain, the top five performers were made up of companies losing share value: Nordic American Tankers at 12.9%, StealthGas at 24.8%, Teekay LNG Partners at 27.4% and Euronav with a 30% drop.
The bottom dwellers after Scorpio Bulkers, GasLog Partners and GasLog were Golar LNG Partners at 71.5% and Scorpio Tankers shedding 67%.
