Cleaves Securities believes Hunter Group is not about to disappear from the tanker scene any time soon, despite the recent sales of two VLCCs.
Oslo-listed Hunter has agreed to dispose of the 300,000-dwt, scrubber-fitted Hunter Laga and Hunter Saga (both built 2019) for a combined $168.4m, or $84.2m each. Brokers pointed to Abu Dhabi National Oil Co as the new owner.
The company now has five modern VLCCs after selling one of its original fleet of eight tankers to SK Shipping last year for $98m.
Cleaves head of research Joakim Hannisdahl said: "I don't see any other assets Hunter will buy. These assets are the best you can have out there."
Speaking on the Norwegian investment bank's quarterly shipping webinar, he added: "I would expect distribution to equity holders via special dividends or buybacks."
But Hannisdahl said: "I don't expect Hunter to unwind going forward. I was actually surprised they sold these two vessels. It could be an efficient way to get away from that net asset value [discount] situation most oil tanker companies are in at the moment."
Hunter has confirmed it will return the proceeds to shareholders.
Questions for ADS Crude
The situation at Oslo-listed ADS Crude Carriers is different, however. The company will be left with no ships after delivering the final 2002-built VLCC of three that it sold for $25.5m each in recent weeks.
The ships were retrofitted with scrubbers by ADS Crude after they were acquired from John Fredriksen's SFL Corp for a combined $67.5m in 2018, when the company was spun-off from parent Arendal Dampskibsselskap (ADS).
"When ADS was first put together it was one of the most enticing investment cases I've seen in many years," said Hannisdahl.
"Buying vintage assets, installing scrubbers — it looked like a good idea. No one could foresee how energy prices would collapse due to Covid 19," he added.
But the launch was timed perfectly, Hannisdahl said. "They hit the mark and they have earned a lot of money on those vintage vessels."
The company now faces the choice of handing back profits to shareholders or renewing the fleet.
Share price doubts
ADS will have net net cash of NOK 25 ($2.25) per share after the sales complete, Hannisdahl said, so the share price should be around that level if the market believes the cash will be returned.
However, the stock was trading down 1% at NOK 21 on Friday.
"Obviously the market is not that sure. The answer will come with the third-quarter results on 18 November. Until then, it's a risk exercise," Hannisdahl said.
"Will they get the cash or will ADS use that cash to buy a more modern vessel? The probability of scenario A or B is best viewed through the share price."
The analyst said the day of the results will be a "very volatile" one for the share.
ADS Crude has recouped $76.5m from the sales. The company had also made back 68% of its $12m retrofit investment by 30 June.
Cleaves has already suspended coverage of US-listed bulker owner Scorpio Bulkers, after it said it would sell the entire fleet to fund wind turbine vessel installation orders in South Korea.
