Bulge-bracket investment bank JP Morgan appears to be ramping up its coverage of the shipping sector as it initiates research on New York-listed Scorpio Tankers.

The finance house has been mostly out of maritime coverage since it parted ways with equity analyst Noah Parquette in June 2019.

It has not covered Scorpio since the departure of analyst Jonathan Chappell for Evercore ISI in 2011.

While there was no immediate word from the bank as to a wider expansion, JP Morgan has initiated a “buy” rating on the product tanker giant under coverage of London-based analyst Samuel Bland.

Bland has followed UK-listed shipbroking giant Clarksons and container liner operator Zim, which he recently upgraded to a “buy” rating.

The analyst set a December price target of $87 on Scorpio, which was trading just above $60 on the New York Stock Exchange on Friday.

“The group is undergoing a sharp inflection in prospects, moving from weak earnings and overleverage to strong earnings and rapid deleveraging, with a current [free cash flow] yield of [about] 30%. We have reasons to think the next two years will remain strong, and this alone creates material upside to the share price,” Bland wrote.

JP Morgan was one of the first big banks to cover shipping during the strong bull run of the 2000s, with Chappell at the helm.

When Chappell moved on to Evercore in 2011, JP Morgan remained involved in the space.

But in June 2019, it became the sixth bank in recent months to either partly or fully drop coverage in the sector, parting ways with analyst Noah Parquette and following in the path of Credit Suisse, UBS, Seaport Global Securities, the Maxim Group and fellow bulge-bracket bank Morgan Stanley.

Maxim would return to shipping coverage, mostly related to a series of back-door IPOs orchestrated by investment banker Lawrence Glassberg.

Scorpio was shipping’s second-best performer of 2022 in share-price appreciation, trailing only product tanker rival Ardmore Shipping of Ireland with a 320% gain.

This week’s note from JP Morgan makes clear that there may be more gains to come.

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“The company historically suffered from a combination of high financial leverage and weak industry profitability. This is now at a sharp inflection point, with the company delevering rapidly and increasing cash returns to shareholders,” Bland wrote.

“This process involves repurchasing ships on sale and leaseback agreements and refinancing at more attractive interest rates, and we estimate it has completed this on about 30 ships, with about 50 remaining.”

There was no immediate word whether JP Morgan will take up other tanker or shipping companies, and TradeWinds understands the bank has been reluctant to reveal its plans.