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01.02.2019 kl 08:53 3239

STOLT-NIELSEN
Q1 stronger, but headwinds in H1
We reiterate our BUY recommendation but have lowered our target price to NOK150 (NOK162). Results should be up QOQ in Q1 on the drop-in fuel prices and stronger tanker earnings, but OPEC cuts are likely to have a negative spill-over effect in the next nine months,
ahead of 2020, when we are positive on tankers.

We have lowered our 2019e net profit by 10% and 2020e by 8% driven by 16% lower divisional EBIT in Tankers for 2019e and 14% by 2020e. The Tanker division suffers from a higher share of product tanker cargoes and we forecast an overall weak tanker market performance for the first nine months of 2019 due to OPEC cuts. As a result of the tight correlation (due to swing tonnage) between crude, product, and chemical tankers, we believe chemical tankers would also be affected, although VLCCs would be most affected. However, the run-up in rates towards year-end combined with drop in fuel and oil prices should make Q1 2019 look a lot better QOQ.

New Houston Dock a catalyst for utilisation. The turnaround stories in Stolthaven Terminals and Tank Containers are the two key reasons for our positive view on Stolt Nielsen, alongside a potential Tankers spin-off and sale of non-core stockholdings post the successful Avenir LNG listing, which is why we find it promising to see Stolthaven Terminals delivering on margins, earnings, and utilization.

We forecast Terminals’ ROCE of 7% in 2020e, up from 6% in 2018, and EBITDA of USD141m, up
from USD133m in 2018. For earnings to improve further, utilisation needs to increase
from the low 90s% area and towards the 96% average utilisation from 2008–2012e. A key catalyst should be the new dock in Houston, expected to be completed in Q1 2019, which should reduce waiting and turnaround times and throughput volumes.

Large investments in non-core companies. Stolt-Nielsen owns 45% of Avenir LNG, which is up ~82% since its private placement (thus well received by capital markets), putting its ownership in Golar LNG, Avance Gas, and Avenir LNG (total gas exposure) at USD143m, which comes on top of its divisional core presence.

Reiterate BUY, but target price lowered to NOK150 (162) based on 0.75x our multiples-based SOTP of NOK200/share (NOK217) driven by lower estimates in tankers. We find the stock attractive at a 0.5x P/B and a 5.7x 2019e P/E.

Our bull-case fair value of NOK209/share is based on 0.70x our steelbased SOTP

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