DNB Markets has downgraded shares in car carrier giant Wallenius Wilhelmsen as a key contract renewal is projected to dent profit in 2020.
Analysts led by Nicolay Dyvik dropped the bank’s rating on the Oslo-listed shipowner from buy to hold, with their target price pulled down from NOK 42 to NOK 32 per share.
DNB Markets has raised its profit forecast for the shipowner by 9% to $190m. However, its 2020 projection has been cut to $158m.
Dyvik explained the company is set to renew its HMG charter later this year, with the deal priced 20% above the average rate.
The contract accounts for more than 10% of volumes for the company’s Ocean division and both the rate and volumes currently on the table could fall under a new deal, the analyst reasoned.
“If Wallenius Wilhelmsen were to see a lower share of volumes, it would need to reallocate a share of the fleet to new areas, which is usually costly,” he added.
Shares in the company dropped 2.48% at NOK 27.48 each during morning trading in Oslo.
Dyvik also pointed to fuel risks for Wallenius Wilhelmsen as IMO 2020 rules arrive and its limited takeup of scrubbers.
