Fearnley Securities is initiating coverage on d’Amico International Shipping following the product tanker owner’s debt-cutting efforts.
It expects the Milan-listed company to shift its priorities to dividends and buybacks while giving the stock a buy rating and a €7.80 ($8.49) target price.
“While [d’Amico] has no firm dividend policy, they’ve initiated an opportunistic buyback programme for up to 15% of the share capital to be utilised alongside dividends,” analysts Fredrik Dybwad and Oystein Vaagen said.
They added that d’Amico was trading at 0.6 times net asset value (NAV), below the sector average of 0.8 times.
The ownership structure and modest share liquidity warranted a “slight discount to peers”, they said, and share buybacks would eventually become less attractive due to that low share liquidity.
“Considering their young fleet and upwards price momentum modern tonnage, we argue pricing closer to NAV should materialise as increased distributions come into fruition,” Dybwad and Vaagen said.
For the third quarter, d’Amico recorded a $48.9m profit and paid a $20m dividend, following a $22m dividend in April.
To 30 September, the company has also bought back nearly 1.6m of its own shares for a total of €6.1m.
Meanwhile, it has pared down its debt from daily repayments of $6,147 per day in 2019 to $3,670 per day this year.
It forecast those numbers to fall to $3,347 per day next year and $3,324 per day in 2025.
On an earnings call, chief financial officer Carlos Balestra di Mottola said investors should expect more dividends in 2024.
“Given our expectation of developments for the market next year, I think there is a good chance that the absolute number of dividends distributed next year could be higher,” he said.
On Wednesday, d’Amico shares closed down €0.01 to €5.04.
In mid-November, they hit their 52-week high of €5.81.
