Scorpio Tankers’ shareholders could enjoy considerable payouts later this year.
“We believe the next step for the company is to realise its substantial distribution potential, with its unofficial $800m net debt target possibly just around the corner as LR2 spot rates now have surpassed $100k/day,” DNB equity analyst Jorgen Lian said in a note.
DNB said it should be compared to the estimated operating expenditure of $8,000 per day, which implies substantial earnings potential and enables the company to pay out more to shareholders.
Scorpio Tankers is one of the most discounted tanker stock in DNB’s coverage, Lian said. The stock trades at 0.9 times price/net asset value (NAV) versus similar product tanker peers and the wider tanker group at about 1.0 times, according to the Norwegian bank.
Its fleet is one of the most modern and scrubber-fitted, with significant exposure to spot LR2 and MR earnings, DNB added.
It kept its “buy” recommendation and raised the target price to $82 from $75.90. The shares closed at $69.15 in New York on Wednesday.
The company’s NAV is up 50% year on year, “benefiting from well-timed, aggressive share buybacks and vessel values at 16-year highs”.
DNB forecasts fourth-quarter adjusted Ebitda of $224.1m, 4% below consensus, and believes the $0.35 fixed dividend per share from the third quarter will be maintained, in line with consensus.
The bank has increased its estimate for 2024 adjusted Ebitda by 36%.
“Given the company’s earnings and aggressive debt repayments, we see higher payout potential from around the second quarter,” Lian said.
Scorpio Tankers will report results before the market opening on 9 February.
