With Havila Kystruten’s newbuilding difficulties out of the way, Fearnley Securities is bullish on the Norwegian cruise and ferry operator.
The bank picked up coverage on Havila Kystruten on Wednesday, giving it a buy rating with a target price of NOK 1.80 ($0.16), as the company has sorted out its sanctions issues and can begin focusing on operations and cash flow.
“As the summer season for Norwegian recreational cruises comes to an end, we can look back at record-breaking levels of tourism,” Fearnleys analysts Oystein Vaagen and Fredrik Dybwad wrote.
“Near 4m passengers have visited the Norwegian western and northern coast on cruise ships [year to date] — likely a positive sign for what’s ahead for.”
The duo estimates the company will generate NOK 604m in Ebitda in 2024 and NOK 780m in Ebitda in 2025 thanks to higher utilisation and prices.
They said high debt costs would drag on cash earnings at the start, a loan repayment scheduled in the fourth quarter of next year would improve things, and funding risks are low, given that €50m ($52.4m) is guaranteed by parent Havila Holding.
Havila Kystruten ran into trouble in 2022 when JSC State Transport Leasing Co, better known as GTLK, landed on Western sanctions rolls following Russia’s invasion of Ukraine.
The operator had financed four cruise ship newbuildings through the Moscow financing house’s subsidiaries in Dublin and Hong Kong.
Two of the ships were already on the water, but two others were still under construction at a Turkish shipyard when the sanctions hit.
The company enlisted the help of attorneys at Wikborg Rein to undo the financing agreements with GTLK, a move that required approvals from the US, UK, Norway and others.
The company took control of the two ships, the 640-berth Havila Pollux and Havila Polaris (both built 2023), in August.
All four of the newbuildings operate on government contracts for voyages in Norway’s west and north.
In early trading in Oslo, Havila Kystruten shares were trading at NOK 1.05, up just under NOK 0.02 from the previous close.
