Norway's Hunter Group could be about to enter a new shipping sector after selling three of its VLCCs in recent months.
Major investor Arne Fredly told Norwegian media on Friday that he is unhappy with the Oslo-listed company's share price, which he sees as way below net asset value (NAV).
"The last ship was sold because we want to have good cash in connection with the establishment of a new business area," he told Finansavisen.
However, Fredly did not give further details.
Earlier in February, Hunter said it was banking $84.5m for the 300,000-dwt Hunter Atla (built 2019), reportedly from Adnoc Shipping & Logistics.
This followed the disposal of two other VLCCs to the same owner towards the end of last year.
Frode Morkedal, managing director of research at Clarksons Platou Securities, said the four remaining VLCCs are supporting a current NAV of NOK 3.40 ($0.40) per share.
The stock is currently trading at 80% of this level.
"Based on the strong balance sheet with lots of cash, high contract coverage through first half 2021, competitive break-even rates, and a tanker market in recovery, we believe the stock should at least close the gap to NAV," Morkedal said.
Clarksons Platou is forecasting a potential NAV of towards NOK 4 per share, if asset values regain long-term averages as the tanker market normalises by 2022.
Risk/reward equation looks good
"While we can only speculate on what their next investments will be, we feel the risk/reward is good and thus reiterate our buy rating," Morkedal said.
After debt repayments, the Hunter Atla sale is expected to release about $34m of cash.
Hunter has not commented on how it will use the money.
In contrast, the owner had committed to a special dividend for the previous two vessel sales.
"We therefore believe a dividend is not on the agenda this time, or else they would have said so," Morkedal said.
Clarksons Platou estimates Hunter will have $60m in cash after the Hunter Atla deal and after paying a dividend of $66m this month.
The $84.5m price for the VLCC indicates ship values are up by $3m or $4m on broker quotes.
The investment bank calculated that Hunter's current share price reflects just $81m per VLCC.
Rates tipped to rise
"Historically, when the VLCC market is in a 'normal' state of $40,000 per day, we find VLCC resales are often sold for $102m, or about $99m for a one-year-old," Morkedal said.
The analyst is tipping rates to hit this daily level in 2022 and $55,000 per day in 2023.
Hunter's fourth-quarter Ebidta of $17m was in line with expectations.
Clarksons Platou expects Ebitda of $9m and net profit of $2m in the first quarter in what is described as a "very challenging tanker market".
