SFL Corp has built an “impressive position” but it is priced for it, Fearnley Securities says.
The Norwegian broker re-initiated coverage of the company’s stock on Tuesday with a “hold” recommendation and a target price of $11.50.
Fearnleys said there is upside to the dividend and the cash flow in 2024 for the John Fredriksen-backed shipowner.
“This, through their rock solid $3.4bn backlog (low counterparty risks, even in containers), more than healthy $118m cash position and average contract duration of 5.9 yrs. On top of this comes cash flow upside potential, through eg, re-contracting of the [40,700-gt, 2008-built semi-submersible] Hercules and other options.”
Last November, Maersk extended an option for the 9,500-teu Maersk Sarat (built 2015) until mid-2025, adding around $13m to SFL’s charter backlog.
However, analysts Oystein Vaagen and Kristin Hafstad argued in a note that with the equity now priced at an estimated sub-10% yield in 2024, including Fearnley Securities’ assumption of a $0.28 quarterly dividend, the cash flow upside potential and prospects are largely priced in.
Fearnleys keeps its credit recommendation at “buy”.
Given SFL’s $3.4bn revenue backlog and reputable counterparties, it believes the company can handle downturns and maintain its debt obligations.
