Cleaves Securities is recommending disposing of Oslo-listed shares of Avance Gas after what analysts viewed as disappointing second-quarter numbers.
Head of research Joakim Hannisdahl said the company had missed the mark, while Danske Bank analyst Anders Karlsen said the period to 30 June was soft as waiting time and off-hire affected the result.
Cleaves said Avance had "significantly underperformed" and the investment bank has cut its target price for the stock to NOK 22 ($2.46) from NOK 26 previously.
The shares were trading down 6% at NOK 22.70 in Oslo on Wednesday.
The company has seen its stock rise by 35% since Cleaves published its July Shipping Quarterly, leading it to downgrade Avance Gas from buy to sell "in light of recent share performance and lowered target price".
Time charter equivalent revenue was $34m, far below Cleaves' $46m forecast and consensus of $40m.
The miss was partly due to lower-than-expected realised charter rates at $30,860 per day versus Cleaves' expectations of $39,864.
Risk to rate levels
Hannisdahl added: "With the traditional low season ahead (approx. September-April), we believe there is near-term downside risk to VLGC spot rates from currently very strong levels."
Looking into 2021, US LPG exports are expected to fall 10% year on year, having a significant negative impact on tonne-mile demand, he said.
Karlsen was more bullish on rates, however.
"Since second quarter, the spot market has improved and US LPG exports have held up. This makes us fairly optimistic in terms of outlook for the LPG space," he said.
"However, we expect the share to trade down today after a good run lately and following weaker than forecast results."
In the second quarter, Avance made a net profit of $6.7m, against $9.8m in the same period of 2019, bringing the six-month profit to $21.8m. Revenue dropped to $50m from $61m.
