In the simplest form, five equity analysts assembled on a panel at Capital Link’s annual international shipping forum on Monday favoured tankers as their top stock bet for 2023.
But for three of the researchers, the focus was on tankers carrying LPG rather than the more mainstream choices in crude and clean products.
LPG rules, but which owner?
The stockpickers had their feet put to the fire by panel moderator Jerry Kalogiratos, who as chief executive of Evangelos Marinakis’ Capital Product Partners also has experience in the gas sector, albeit with LNG tankers.
Omar Nokta of Jefferies went with tankers with a top pick of Dorian LPG, calling the Connecticut-based company “a gift that keeps on giving”.
Ben Nolan of Stifel acknowledged that “it’s hard to argue against tankers and you can take your pick” but in the end, his pick was a different LPG operator: Navigator Gas Holdings, which he said will benefit from increased gas exports from the US Gulf.
Then Maxim Group analyst Tate Sullivan brought out yet another LPG name, placing his bet on Harry Vafias-led gas player StealthGas. Sullivan actually split his vote, casting the other half for Greek capesize owner Seanergy Maritime.
While an impressive show of support for LPG, it was not unanimous.
Citibank analyst Christian Wetherbee also sided with tankers, but his ballot went to Belgian crude tanker giant Euronav.
“A lot of capital to be released,” he said, plus “optionality” around potential merger-and-acquisition activity around its derailed-but-not-done activity with John Fredriksen’s Frontline.
Finally, Clarksons Securities analyst Frode Morkedal completed the rout for tankers as a sector, saying he favoured either Frontline or clean product giant Scorpio Tankers.
Before forcing the researchers to a bottom line, Kalogiratos led a discussion that ranged from capital allocation around fleet renewal or expansion versus shareholders’ returns, to attitudes toward whether public companies should have pure-play or diversified fleets.
Newbuilding activity in bulkers and tankers has approached record lows as shipowners wrestle with the question of what green technology may replace fossil fuels as the propulsion system of the future.
But Nokta argued that owners cannot afford to get complacent about fleet renewal in the meantime.
“No one knows what the propulsion will be, but it’s easy for companies to get flat-footed and do nothing,” Nokta said.
“Before long, your fleet gets old and you may have to slow steam. I’m not saying grow the fleet, but it’s one area where you have to invest.”
But Nolan called this risky business.
“Shipowners are generally motivated by greed or fear,” Nolan said. “I haven’t seen a lot of people willing to take that risk. In a commoditised industry, you’re generally not rewarded to be a first mover.”
