BW LPG shares fell after Pareto Securities downgraded the stock to hold from buy.
“BW LPG offers a rock-solid balance sheet and healthy yield – but is no longer at a discount to peers – having outperformed dramatically YTD. It’s time for a pause,” Eirik Haavaldsen, head of research, said in a note.
The target price was cut to NOK 185 ($17.3) per share from NOK 230.
Shares of the VLGC owner dropped as much as 7.3% to NOK 173.10 in Oslo on Friday.
According to Pareto, the second-quarter results will be “solid” but the “focus must be on a disappointing start” to the third quarter.
“And now, VLGC rates are less than half the level we enjoyed a year ago. This despite a theoretical sufficient arbitrage, increasing US inventories, and few newbuild delivered this year,” Haavaldsen said.
“Importantly, we have seen rising US terminal fees, and shipping is no longer the main bottleneck in the value chain. While we still expect rates to move higher in line with normal seasonality, near-term estimates are too high,” he said.
Pareto sees “estimates coming under pressure”.
“Slower US production growth and re-accelerating fleet growth from 2026 cause longer-term concerns – and a negative estimate trend is thus unwelcomed,” Haavaldsen said.
The BW LPG stock has rallied about 80%, including dividends, since a low in March.
The company completed its dual listing on the New York Stock Exchange on 29 April.
The US listing has given BW LPG a gross asset value premium of around 16%, which is higher than its peers, according to Pareto.
BW LPG’s strong financial position and generous dividend policy justify its higher valuation, but the current boom in commodity shipping means that any suggestion that its profitability might have peaked is met with significant negative reactions from investors in the stock market, Haavaldsen concluded.
The company reports second-quarter results on 22 August.
