Odfjell will release its 3Q22 report next Thursday. Results are anticipated to reach similar levels as in a memorable 2Q22. The positive mood towards the chemical tanker segment should carry on, with our sentiment strengthened by the main competitors solid results. Despite adjusting the Risk-free rate in our valuation, we increase the Target Price to NOK 85/sh following the strengthening of USD vs. NOK. Buy is reiterated ahead of report.
Company’s guidance and strong SNI results point to a solid quarter
Despite typically seasonally softer summer market, 3Q22 results were guided to stay continuously strong with timecharter earnings in line QoQ. Following the solid report from the main competitor Stolt-Nielsen, we keep our elevated sentiment towards the chemical tanker market and anticipate somewhat higher revenues to be reported, but the main operating metrics a tad weaker QoQ due to stricter margins.
Solid figures lead to a more effective loan structure and dividends
In the cyclical upturn that is happening currently, Odfjell managed to refinance and accelerate debt reductions with drawing down USD 32m of new mortgage loans last quarter but repaying USD 39m related to maturing bond and two vessel loans totalling USD 14m. With these steps, the company will reduce annual interest expenses by USD 2.5m. Notably, the next large loan payment is to occur only in 3Q23 with a maturing bond, thus, the company has enough time if it chooses to refinance it. Also, semi-annual dividends of USD /sh for 1H22 were announced, while we currently expect USD /sh for 2H22.
Changes in FX offsets the RFR adjustment
We increased RFR in our valuation from 3% to 4%, but this was more than offset by the changes in FX and a solid peer movement. Thus, the Target Price for Odfjell’s stock is raised to NOK 85/sh, while Buy is reiterated.
