Norden could be able to close the gap between its share price and its net asset value by selling vessels, according to Clarksons Securities.
The investment bank pegs the Danish owner-operator’s NAV at DKK 390 ($55.80) per share, but the stock was trading at DKK 216.2 at midday in Copenhagen on Tuesday.
It said buying vessels for which Norden has well-priced purchase options and flipping them for profit could be the way to bridge that gap.
“Relative to peers, Norden’s earnings multiples and free cash flow yields rank among the lowest due to ongoing negative trading margins,” Clarksons’ shipping equities team, led by managing director Frode Morkedal, said in a note on Tuesday.
“Improvements in either metric are required to narrow the discount, in our view.”
Norden has purchase options remaining on 48 vessels that are exercisable by the end of 2025 at a strike price on average 23% below fair market value.
“Given the likelihood of continued margin struggles and potential weakness extending into 2025, asset monetisation through exercising in-the-money purchase options presents the most immediate path to reducing the valuation gap,” Clarksons said.
“The recent vessel sales and management’s emphasis on these purchase options support this strategic direction.”
Clarksons has the Copenhagen-listed stock designated as a “buy” with a target price of DKK 380.
Norden has deals in the pipeline that will generate $25m in gains, of which $21m is expected to be realised in 2024.
Two of the five vessels it has earmarked for sale have been from declared purchase options in line with its NAV.
Norden has lowered the top end of its annual profit guidance from the previous estimate of $240m because of weak product tanker rates in the third quarter and negative margins for its operated fleet.
It expects its full-year profit to fall between $160m and $210m.
The guidance for 2024 includes $83m in gains from vessel sales already signed and agreed.
Norden’s asset-light freight services & trading division booked an $18m loss for the third quarter, which it said was due to weaker tanker rates, while earnings from dry cargo are improving.
The company suffered its third consecutive quarter of negative margins on its operated ships, losing $427 per vessel day on its 464-ship operated fleet of 371 bulkers and 93 product tankers.
This is $7 per day less than the second quarter, when it had a slightly bigger operated fleet.
Norden said its margins were affected by “persistent high voyage costs and charter hire”.
Its assets & logistics division contributed $43m to the bottom line on the back of high charter coverage for its owned fleet.
