Ireland’s Ardmore Shipping has begun using some of its cash to kick-start its fleet renewal — and there is the financial power for more deals.
That is the view of Fearnley Securities, which said in a note to clients that the US-listed product tanker specialist is likely to see its loan-to-value (LTV) ratio go to zero.
This is due to limited debt amortisation, strong markets, limited capital expenditure and a breakeven of $13,900 per day in strong freight markets.
The current LTV is 10%, while the company pays out one-third of its profit as dividends.
“While Ardmore remains conservative on pay-outs, there’s definitely room and possibility to improve here, or pounce on attractive additional growth opportunities,” analyst Oystein Vaagen said.
With asset values and estimates having grown since the last update, the investment bank has increased its target price to $20 per share, with a “buy” rating.
In the last month, Ardmore has shipped out one older MR tanker and bought a modern unit.
India’s Great Eastern Shipping snapped up the 50,100-dwt Ardmore Seafarer (built 2010), which brokers reported sold for $27.2m.
And Ardmore splashed $42m on the 50,000-dwt St Pauli (built 2017) from Meiji Shipping in Japan for $42m.
The owner, like its product tanker peers, is riding high on current market fundamentals, Vaagen said.
Having booked the majority of its fleet days for the first quarter, profit is set to rise, the analyst believes.
And should the Red Sea disruption last a couple of more weeks, second-quarter earnings estimates are likely too low.
Fixing into Q2
“Interestingly, while it’s early days, some shipowners are already seeing market-level voyages beginning to be booked into the second quarter,” he said.
“The longer the disruption in the Red Sea persists, the run-rate earnings momentum into the second quarter is at the moment higher than going into the first,” Vaagen added.
The stock closed up less than 1% at $16.35 in New York on Monday.
