DNB Markets’ Jorgen Lian is adjusting his expectations for a trio of tanker giants ahead of second-quarter earnings.
The veteran analyst on Tuesday reiterated buy ratings on DHT Holdings, Euronav and Frontline, but lowered Euronav’s price target to $21.50 from $23 and Frontline’s to NOK 210 from NOK 240.
DHT saw its price target jump from $11.90 to $12.20.
“While the start of summer has seen a seasonal dip in rates and production cut headwinds, we still expect 6-digit VLCC rates this winter on recovering oil demand and exceptional supply-side fundamentals,” Lian said in his note on DHT.
He made a similar point in his notes about Euronav and Frontline.
All three companies, he said, are an attractive entry point for investors looking for exposure to those potentially sky-high rates, with DHT and Euronav sporting favourable gross asset value to enterprise value discounts and Frontline trading at a historical discount to its price to net asset value.
Lian did caution that tanker rates would be under pressure in August thanks to Saudi Arabia’s decision to extend 1m barrel per day production cuts for another month.
The move could pull down global tanker demand by approximately 2%, with further headwinds coming from Russia’s 500,000 barrel-per-day cuts.
Since the beginning of June, the Baltic Dirty Tanker Index climbed from 1,091 to 1,181 on 20 June before cooling to 929 on Monday.
The index’s drop came as VLCCs saw their rates fall by two-thirds since the late June crest, cratering from $52,116 per day on 20 June to $17,741 per day on Monday, while suezmax rates were halved over the same period, dropping to $27,037 per day.
Aframax rates followed a different pattern, sliding the entire summer, falling $1,366 on Monday to $32,149 per day.
In New York, DHT saw its shares rise $0.29, or 3.32%, to $9.03 on Monday, while Euronav shares jumped $0.41, or 2.77%, to $15.20.
Frontline’s Oslo-listed shares were up NOK 0.16, or 0.11%, to NOK 151.66 in early trading on Tuesday.
Frontline will publish its second-quarter results on 31 August, while DHT and Euronav have not yet announced a date for their earnings releases.
