Scorpio Tankers is getting a bump from B Riley FBR thanks to improving product tanker rates and the incoming IMO emissions regulations.
Liam Burke, managing director at the investment bank, raised the Emanuele Lauro-led company from neutral to buy in a Monday note while upping its target price rising to $25 from $22.
"As the world’s largest operator of product tankers, Scorpio Tankers should benefit from the underlying strength in the product tanker market driven by the declining pace of new shipbuilding and the increase in demand for distillates to meet IMO 2020 standards," Burke wrote.
He said the New York-traded shipowner's move to outfit scrubbers on its young fleet positions it well to take advantage of demand for the low-sulphur fuel set to ramp up next year.
The new price target, he wrote, implies a higher-than-average enterprise value to Ebitda multiple for tanker owners, "but the company is well positioned with an attractive asset base in an improving market environment."
In midday trading Monday, Scorpio Tankers shares were up 1.9% to $18.78.
Last month, the company said it expects to save between $100m and $125m thanks to scrubber installation. The estimate assumes a $200 to $250 per tonne spread between the high and low sulphur fuels.
Scrubbers are set for installation on 95 of Scorpio Tankers' ships, with installations running into next year. It expects to finance the majority of the project.
