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27.08.2020 kl 14:31 2199

BWLPG-NO (SELL/N37) 2Q20 Review: Great Company, Headwinds Ahead (downgraded from HOLD)
BW LPG reported a better than expected 2Q result, but mainly due to accounting standards. The company is doing all the right things, fixing out vessels at premium rates and paying down debt, but is nevertheless facing the expected market weakness ahead. We downgrade to SELL (from HOLD) due to the recent share price performance, and see BW LPG as a potential consolidator over the coming year.

Quarterly review: BW LPG reported TCE revenue of $149m, far above our $135m forecast and consensus at $134m. The main reason behind the beat was the load to discharge accounting method under IFRS 15, adding $17m to the top-line vs the discharge to discharge basis our modelling is built upon. Also adding to the top-line was a fleet utilization of 96.5% vs our 94.0% forecast. Thus, adjusted TCE/d was ~$35,846/d vs our $37,539/d forecast. With operational costs below expectations, somewhat offset by higher net financials, EPS (adj.) came in at $0.46 vs our $0.34 forecast and consensus at $0.33. The company declared a DPS of $0.15 vs our zero expectations. Guidance for 80% of fleet days covered at ~$27k/d in 3Q and a significant increase in TC-out days for 4Q20 and 2021 at levels exceeding our forecast leads us to revise up our estimates.

Investment case: With the traditional low season ahead (approx. September-April), we believe there is near-term downside risk to VLGC spot rates from currently very strong levels. Looking into 2021E, US LPG exports are expected to fall 10% y/y, having a significant negative impact on tonne-mile demand for seaborne LPG transportation. We nudge up our target price on BW LPG to N37 (from N36) as a reflection of our higher earnings estimates. We do however downgrade BW LPG to SELL (from HOLD) due to the recent strong share performance.
Redigert 21.01.2021 kl 07:25

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