BTIG has launched coverage of John Fredriksen’s Avance Gas with a buy rating amid the projection a VLGC market upturn will take the shipowner back into the black this year.
Avance Gas is one of the top performing shipping stocks this year as the VLGC market recovers from a multi-year downturn.
And with the LPG shipping sector “entering into a multi-year period of secular growth” on the back of increased US exports, Lewis believes both rates and asset values will be on the up.
VLGCs earned just $15,000 per day in 2017, having collapsed from a record peak of $141,000 per day two years previously.
Now, Lewis forecasts average rates of $28,000 per day this year and $35,000 per day in 2020.
“We believe VLGC asset prices have ample room to run under a backdrop of increasing seaborne LPG volumes,” he added.
Given his rate forecasts Lewis projects Avance Gas is heading for a profit of $26.8m in 2019, rising to $54.7m in 2020.
This would mark a swing from a loss of $43.2m in 2018.
“Post the company's May refinancing of the balance sheet, Avance has an attractive cash breakeven and is well-positioned to opportunistically grow the fleet,” Lewis said.
VLGC rates touched $70,000 per day of late, driving up the period charter market.
“Bottom Line: We believe Avance stock has some catching up to do,” Lewis said.
Avance Gas is heading into the upturn under new leadership.
Vocal consolidator Christian Andersen, who led Avance through its $100m listing in Oslo in 2014, departed in April.
He was quickly replaced by namesake Ulrik Andersen, who was drafted in from Petredec.
