Avance Gas shares lost further ground today following a second-quarter earnings miss, suspension of its dividend, a revision of its market view and a downgrade by Clarksons Platou Securities.
Oslo-listed Avance, a long-term market bull and dividend machine, admitted it was difficult to see a VLGC market recovery and predicted a challenging period though 2016 and 2017.
Its stock slid by 7.1% to close at NOK 17 ($2.07) per share today and is now down 83% in the year to date.
Herman Hildan, an analyst at Clarksons Platou Securities, downgraded Avance to neutral from buy following its quarterly report.
“From an operational perspective we view Avance Gas in a fair position to face a challenging market ahead,” he said.
“However, as seen multiple times recently in other sectors, the vicious shipping downturn could quickly drain liquidity due to minimum value covenants.”
The VLGC owner clocked up a net loss of $14.5m, against a profit of $21.1m in the previous quarter. The loss was deeper into the red than the $4.3m consensus.
Erik Nikolai Stavseth of Arctic Securities noted Avance had “performed a 180” on its market view and was eating a piece of humble pie with its more sobering outlook following on the heels of an optimistic view at the end of the first quarter.
With cash losses likely over the coming quarters, the analyst suggests an equity issue may be required in the next 12 months to strengthen the company's balance sheet.
Mike Webber of Wells Fargo noted Avance had suspended its dividend just three months after reducing a former full payout model to 50% of net income. Given the market the change was not a surprise, Webber added.
Analysts at DNB Markets, led by Nicolay Dyvik, were upbeat on Avance’s liquidity position.
They noted a $25m credit line, $22m in outstanding demurrage and a likely $10m boost from the sale of its only LNG carrier provided a “triple buffer”.
