DNB has cut the share price targets for BW LPG and Avance Gas after a plunge in VLGC rates.
The Oslo-based bank lowered BW LPG’s target price to NOK 204 ($19.50) from NOK 212.
The Avance Gas target was set to NOK 163 compared with NOK 177 previously.
DNB has cut its near-term rate estimates after the recent decline but said there is potential for an upswing.
“VLGC spot rates are down [about] 80% from the peak, along with large draws on US inventories last week (11%) during cold weather,” analyst Jorgen Lian said in a BW LPG research note.
“However, the US-Far East arbitrage is again trending up and implies [about] $60,000/day rates, as an outlook for warmer US weather should allow propane inventories to remain above the five-year average, which leaves the potential for another rate upswing.”
Lian described BW LPG as a “top dividend yield company”.
He puts the dividend yield at about 32% for the fourth quarter of 2023 and the first quarter of 2024 and about 23% for the next 12 months — “the highest among LPG peers”.
DNB maintained a “buy” recommendation for BW LPG and Avance Gas.
For Avance Gas, Lian estimates a run-rate dividend yield of 27% for the final quarter of 2023 and the first quarter of 2024, and 21% for the next 12 months.
Both stocks were little changed in early trading on the Oslo Stock Exchange.
The companies are scheduled to report results for the fourth quarter on 29 February.
The bank estimates a quarterly Ebitda of $80.2m for Avance Gas, 2% above consensus.
It forecasts BW LPG to report fourth-quarter Ebitda of $236m, 4% above consensus.
