Analysts are tipping a big boost to New York-listed Atlas Corp's profit in the coming years after a huge expansion of its containership fleet.
The tonnage provider said in its first-quarter results that fleet growth hit a record 27%, with subsidiary Seaspan Corp adding 36 vessels, including 32 newbuildings, at a cost of $4.6bn.
Contracted revenue hit $12bn, with half of this added in 2021 alone, through long-term charter deals averaging 11 years.
Fearnley Securities called the backlog "massive" and lifted its target price to $21 per share, from $17, to reflect surging asset values. The shares closed at $14.32 on Monday.
The Norwegian investment bank has a "buy" rating on the stock and was a bookrunner for Atlas' recent $300m bond issue.
Good deals on newbuilds
Fearnleys believes the group has been able to secure attractive prices ahead of the spike in vessel values.
This implies Atlas will grow Ebitda by about 50% over the next three years, Fearnleys added.
"On our estimates the company generates circa $250m per year of free cash flow to shareholders (post dividends) over the next four years, more than covering the equity portion on the newbuilding programme," the investment bank said.
Analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart added that the underlying boxship market is very strong, with liner profitability at a 15-year high and the outlook to 2024 appearing very favourable.
Long-term prospects bright
"We also believe the longer-term prospects are sound, considering the record low orderbook and the wave of regulatory hurdles facing the shipping industry over the next 10 years that will have dramatic impacts on vessel capacity," they said.
TradeWinds reported last month that Hong Kong-headquartered Seaspan's appetite for new boxships continues to grow.
The tonnage supplier is drawing up plans to spend another $1.46bn on a further 20 new vessels.
At 31 March, the company had liquidity of $837.5m.
Net profit in the first quarter grew to $97.6m, against $51.9m in 2020.
Revenue grew 21% to $372.6m and Ebitda was up 21% to $238m, in line with expectations.
Record growth
Atlas chief executive Bing Chen said: "Following a strong performance in 2020, Atlas has delivered another record growth in this quarter while significantly expanding upon the breadth and scope of our franchise."
Chief financial officer Graham Talbot added that the company had continued to enhance its funding portfolio and optimise its capital structure.
"We are confident that our liquidity and financial strength will continue to improve over 2021," he added.
