Investors in LPG carrier owner Navigator Holdings are essentially getting a stake in the company’s joint venture Morgan’s Point ethylene export terminal for nothing, analysts say.
Fearnley Securities calculates the US-listed company’s $1.1bn market cap is covered by vessel net asset value (NAV).
“In other words, Navigator’s equity is covered by steel NAV alone and investors are basically paying for ships whilst getting the ethylene export terminal business for free,” analysts Oystein Vaagen and Fredrik Dybwad said.
The Texas terminal, owned 50/50 with Enterprise Products, is still expanding.
Earnings contributions will rise substantially after construction finishes at the end of 2024, the investment bank believes.
Vessel NAV is pegged at $17.80 per share.
Fearnley Securities values the terminal's NAV contribution at $8.60 per share, boosting the NAV to $26.40.
The stock closed down 1% at $15.47 in New York on Monday.
Fourth quarter earnings per share are forecast to come in a little higher at $0.30, from $0.27 three months earlier, with further growth to come in 2024.
Ebitda is estimated at $68m, a small downward adjustment on the back of higher costs.
Navigator has secured its mid-sized gas vessels on fixed rate charters, with few open days left for the first half, leaving it positioned to ride out potential market obstacles, Vaagen and Dybwad said.
Orderbook in owners’ favour
Fleet fundamentals are also positive for LPG ships.
Nearly one five vessels in the 18,000 cbm to 24,000 cbm sector is 20 years of age or older.
The orderbook stands at just 7% of the existing fleet.
For larger vessels of up to 40,000 cbm, the orderbook is higher at 17%.
But the analysts point out that more than half of this tonnage is not scheduled for delivery before 2026.
Fearnley has a “buy” recommendation on the stock.
