Rising US exports have convinced Wells Fargo Securities to end a near half decade on the sidelines of the LPG market and upgrade stock in VLGC giant Dorian LPG and Navigator Holdings.
Analyst Mike Webber raised both of the New York-listed shipowners from market perform to outperform amid improvements in their respective freight markets.
Webber explained the LPG space has gradually shaken off the over-building between 2013 and 2015 which dragged rates down from record levels.
He said firming day rates, cash flow, and asset values were creating a “compelling value propositions” for long haul players like Dorian and specialized mid-sized companies like Navigator.
“While LPG day rates and utilization levels have already shown signs of life throughout 2019, the factor that’s really bringing us back into the group (after four plus years on the sidelines) is revitalized USG NGL export growth/project momentum,” Webber wrote in a report today.
VLGC charter rates have bounced back to average over $50,000 per day in the last three months, well above the $18,000 per day level seen between 2016 and 2018.
This has been met with a bump in VLGC asset prices, with a five-year-old ship now pegged at $61m to $64m, Webber said.
“Despite those early moves in rates and asset values, LPG [Dorian] and NVGS [Navigator] are still trading at 36% and 20% below their mid-cycle net asset values,” he added.
