Stolt-Nielsen’s chemical carrier operation Stolt Tankers has been tipped for bigger and bigger earnings this year as the effect of higher contract renewals creates a “positive snowball effect.”
This is the view of Norwegian investment bank Fearnley Securities, which has a “buy” rating on the Oslo-listed group.
Analyst Oystein Vaagen said higher rates secured in negotiations with shippers will kick in going forward, supporting earnings growth.
The company’s chemical tanker earnings are steadily rising, despite a slight slow-down in spot rates so far this year on the back of more muted market activity, he noted.
Fearnley Securities estimates sailed-in rates rising 5% quarter on quarter due to contract renewals.
With a heavy portion of deals already renewed, the effect of the higher rates for contracts of affreightment — 30% up in the fourth quarter — will be increasingly meaningful going forward, Vaagen added.
The investment bank estimates Ebitda of $204m in the first quarter.
Rates are forecast to rise from $22,750 per day in 2022 to $29,000 per day in 2023.
A $1,000 per day rise implies an extra $7m in profit for Stolt-Nielsen.
“With the long-term tanker market and the chemical tanker market having solid supply side fundamentals, the earnings growth story for Stolt Tankers remains robust,” Vaagen said.
“With the rising earnings environment, we expect rising pay-outs and see the share now yielding 7-10%.”
Fearnley Securities’ target price for the stock is NOK 400 per share, against NOK 324 in Oslo on Tuesday.
And the analyst argues that an improved balance sheet means a potential spin-off of the chemical tankers in an Oslo initial public offering to further crystallise values is more likely, “should the market be there”.
