BW LPG’s sale of an older VLGC illustrates firming asset values in a weaker rate environment, analysts say.
The New York and Oslo-listed company announced that its 52%-owned subsidiary BW LPG India has sold the 82,260-cbm BW Cedar (built 2007).
On a 100% basis, the sale was priced at about $65m.
Jefferies described this level as “very firm, especially when compared to its sale a year ago of the 2008-built [82,383-cbm] VLGC BW Princess, which changed hands for $64m.”
Analysts led by Omar Nokta added: “Today’s sale is a strong price for a 17-year-old VLGC, compared to last year’s sale for the 15-year-old at the time.”
Both vessels were built at South Korea’s HD Hyundai Heavy Industries and are in effect sister ships.
They offer an “apples-to-apples” comparison in valuations in a market characterised by few secondhand sales, the investment bank pointed out.
“Interestingly, BW had achieved a then-record sales price last year in a market that had seen VLGC spot averages well in excess of $100,000 per day, versus today’s even stronger price in a market that has seen year-to-date averages of a more modest $45,000 per day,” the analysts said.
Jefferies believes the sale-and-purchase market is firm despite the lower spot rates, making its net asset value assessments “seemingly low”.
The transaction is expected to generate a net book gain of around $33m for BW LPG, and $51m in net cash after repayment of the existing bank loan.
BW LPG also said it had declared a purchase option for the 83,325-cbm BW Kizoku (built 2019), which is on time charter to BW LPG.
The Andreas Sohmen-Pao-backed owner exercised the option for $69.8m.
The BW Kizoku is expected to be delivered in January and will continue to trade in the conventional BW LPG fleet.
Arctic Securities’ analyst Kristoffer Barth Skeie called the transactions “impressive”.
The price for the BW Cedar was 36% above Arctic’s estimate of $48m, according to a research note.
