Stifel has expressed sound confidence in Euronav despite Frontline backing out of a deal to acquire the tanker owner for $4.2bn in January.

The US investment bank has upgraded its rating on Euronav shares to buy from hold three months after John Fredriksen-backed Frontline backed out of the proposed all-stock merger.

“While there could still be the potential of a large seller following the merger drama of the past year, which left Euronav largely unchanged, we now can look at Euronav shares on their own merits,” analyst Benjamin Nolan wrote in a note.

Stifel also raised its price target for the New York-listed stock to $22 from $17. After the upgrade, the shares still declined 3.2% on Tuesday to close at $17.26. The investment bank’s price target is based on an expected Ebitda of $889m for this year.

“Euronav is one of the largest VLCC operators in the world as well as one of the largest pure-play crude tanker companies,” Nolan wrote.

“We believe Euronav has one of the best management teams in the business with a track record of generating significant free cash flow, maintaining a conservative balance sheet and acquiring assets at opportune times.”

Nolan also said that Euronav shares are an attractive investment because they trade at a significant discount to net asset value as a result of the weak tanker market.

“While the timing of when that valuation gap closes is unknown, in our opinion, the risk-reward is favourable at these prices,” he said.

Stifel also expects Euronav to reinstate its floating dividend policy at $1.68 per share.