Analysts believe strong shipping markets will ensure Euronav’s massive newbuilding programme is fully funded.
The Belgian shipowner, which is gearing up to be rebranded CMB.Tech, said in its second-quarter results that $2.7bn remains to be paid for 50 newbuildings including tankers, bulkers and container ships.
Clarksons Securities said that despite increasing time charter coverage, the Saverys family company remains dependent on crude tanker and dry bulk markets, as most earnings days remain open.
“Thus, at least for now, the company is dependent on continued strong markets to continue taking delivery of its newbuildings,” analysts led by Frode Morkedal said.
“As long as the tanker and dry bulk markets remain at healthy levels, the company should be able to manage the increased debt and upcoming yard instalments.
“On our rate assumptions and recent asset sales, we don’t foresee any challenges, but additional financing is likely needed if the newbuilding programme is expanded significantly in the near future.”
The investment bank noted that as a consequence of the large newbuilding programme and recent dividend payments, the net loan to value has increased to 66%, among the highest in its peer group.
Morkedal and his team pointed out, however, that the high leverage should quickly increase the net asset value due to the expected high cash flow generation in the coming years.
“The company is expected to see significant cash inflows in the coming years due to its heavy exposure to the tanker and dry bulk markets and leveraged equity returns from high debt levels,” they said.
Furthermore, due to the debt levels, the NAV is sensitive to changes in asset prices, they explained.
Clarksons assesses NAV at $15.30 per share, but expects this to increase to $19 towards the end of 2025.
The stock is trading at a premium to its NAV, closing at $17.12 in New York, up 1% on Thursday.
A 10% increase in value increases Clarksons’ NAV assessment by 18%, the analysts said.
Second-quarter Ebitda of $146m met expectations, they added.
The company has paid out $5.72 per share in dividends this year, partly financed by debt.
Clarksons maintained a “buy” rating on the stock, but lowered its target price to $19 from $20, largely due to the dividend distribution.
