Odfjell releases its results next Tuesday after the market closes. The company guided for a somewhat stronger performance of Tanker division and we anticipate slightly better overall results QoQ. However, following the flat chemical tanker rate development, we suggest that the ceiling of both the shipping cycle and the stock price might have been reached or we are at the verge of it. Thus, with little upside in our view remaining, we reiterate Hold recommendation at NOK /sh Target Price.
Slightly increasing earnings guided
Following the issues at the Panama Canal due to unusually dry weather, and disruptions in Suez canal, Odfjell must have had to bear additional costs for rerouting some voyages, but the trips post mid-January should have had their rates adjusted for an increased distance. Overall, the company guided slightly stronger earnings in 1Q24. Longer-term situation remains solid with favourable chemical tanker /demand balance, although the recent information showed that there was an order in the Chinese yard for 10 comparable stainless steel tankers. In the meantime, we also saw Stolt-Nielsen posting solid results but with no surprises, also the chemical tanker rates seem to be stable, both pointing to little positive surprise expectations in Odfjell’s numbers.
Expanding both the fleet and the Terminals
Odfjell has now orders for 12 new 25,000-40,000 dwt stainless steel tankers, which should be delivered between 2024 and 2027. Furthermore, Terminals are also undergoing the expansion program. The Bay 13 expansion in Houston has already been completed with the first contribution either this quarter or the next. At the end of 2023 the ground was broken for Tankpit-R, the expansion in Antwerp, which has a target to become operational in 1Q25.
Limited upside for the stock seen
As we mentioned before, Odfjell is a very solid company and current situation in the chemical tanker market is far from worrisome. However, there should be little positive triggers ahead and we value the market cycle to be close to the top. Thus, the upside for the stock remains limited, especially after another rally. We increased the Target Price to NOK /sh for Odfjell’s stock, but Hold is reiterated.
Source: Norne Research
