DNB Markets has upgraded the three publicly traded VLGC shipowners following a heavy drop in their stock prices during the past year and an improved outlook for the market.
BW LPG, Avance Gas and Dorian LPG were all raised to "buy" today by DNB’s analysts led by Nicolay Dyvik.
The higher ratings have been matched by improved rate forecasts for VLGCs at the beginning of what is expected to be a profitable period for owners in the sector.
“Our VLGC peer group is down 30% year on year, and based on our new VLGC rate and utilisation forecasts, we find the current two layers of discount unjustified and have upgraded all the three stocks,” Dyvik wrote in a report.
Shares climb
Stocks in all three companies responded positively to the upgrade, with BW LPG and Dorian climbing by about 5% and Avance Gas up by more than 1.5% on Friday.
Dyvik said 2019 is set to be the first year in three years with VLGC rates above cash break-even levels and he is tipping rates to race above $30,000 per day this summer.
For 2019 as a whole, DNB is forecasting VLGC rates of $24,000 per day, a climb from the $18,000 per day it previously predicted for this year.
Further improvements are expected in 2020 with an unchanged forecast of $28,000 per day. For 2021, DNB projects an average rate of $36,000 per day.
