Wall Street’s newest shipping company and the industry’s likely next representative in the US capital markets are among the fresh names added to a basket of stocks with a positive outlook covered by Clarksons Platou Securities.
Evangelos Marinakis and Craig Stevenson Jr-backed Diamond S Shipping and John Fredriksen’s Flex LNG have both been handed initial buy ratings by analysts led by Frode Morkedal.
The increased coverage - which also spans established names like Ardmore, Costamare, and Tsakos Energy Navigation at the same level - comes with Clarksons describing shipping stocks as a “coiled spring” with values the lowest in a decade.
Diamond to sparkle?
Diamond S listed in late March following the private company’s merger with the tanker fleet split off from Capital Product Partners, which created a fleet of 68 ships.
“Diamond S is entering the market at what we believe is a very interesting time,” Morkedal and colleagues Erik Hovi and Henriette Vevstad said.
“Backed by strong fundamentals, a healthy balance sheet, low breakeven and focus on corporate governance, the company is well positioned in our view to become a leader in the upcoming cycle.”
Clarksons Platou Securities has placed a $25 per share target price on Diamond S, which it believes is heading for a profit of $47m this year. Its forecasts chart continued improvement to $210m in 2020 before a dip to $145m in 2021.
Fredriksen's timing on track?
Flex LNG, which is already listed in Oslo, announced plans last week to sail into New York-with a Spotify-style listing.
“Although the current spot LNG carrier market is low and slow because of lack of arbitrage opportunities, we see the market improving into 2020 and find timing for an investment as opportune,” Morkedal and colleagues said.
“With John Fredriksen as the principal shareholder, who has a strong track record in building shipping companies favored in the public markets, we see Flex LNG as having attractive upside potential.”
They placed an $18.5 per share target price on the company, which will not have its full fleet in the water until 2021.
Clarksons Platou Securities forecasts Flex LNG will book a profit of $20m in 2019, rising to $75m in 2020 and $166m in 2021.
Un-investable or time to move?
Last month Clarksons chief executive Andi Case told TradeWinds he saw a “massive misvaluation of shipping companies in the capital markets”.
Morkedal and his colleagues said in the company’s bi-annual report: “Shipping equity valuations are among the lowest levels in 10 years despite a once-in-a-generation regulatory change (IMO 2020) that should significantly tighten the market balance almost irrespective of what happens to the regular supply-demand changes, in our opinion.”
They added: "On top of that, orderbooks for new ships are at two-decade lows meaning fleet growth should slow considerably.
“The generalist investor, not being down to the details on shipping supply-demand, has likely concluded that the shipping sector is un-investable because of perceived recession fears and ongoing trade wars. We believe this is a buying opportunity.”
