Engelske analyser.

Making up for weak start to Q4 The guidance for QTD VLCC spot rates given in the Q3 report was lower than that of VLCC peers, and we expect Frontline to have partly closed the gap during Q4 (results due before the market opens on 28 February). Our lowered TCE Q4e revenue leaves us 22% below EBITDA consensus. As DHT has already made – and Euronav is seeking to make – a deal to expand its fleet, Frontline is lagging behind when it comes to securing a leading position in VLCCs. We reiterate our HOLD but have cut our target price to NOK33 (44).
Lowered Q4 spot rate estimates. We have cut our 2017e EBITDA by 5% from USD209m to USD198m, as the VLCC spot market softened after Frontline’s Q3 results in November, resulting in a lowered 2017 VLCC spot rate estimate of USD23k/day (previously USD25k/day). YTD spot rates for crude tankers have been under pressure, and our revised spot rate expectations for Q1 (due to the weak winter season) cuts our 2018e EBITDA by 28%. Following these revisions we are broadly in line with Bloomberg consensus for 2017, 13% below for 2018e and 2% below for 2019e.
22% below Q4e EBITDA consensus. As the Q4 guidance for VLCC earnings given in the Q3 report was below that of tanker peers Euronav and DHT, we have adjusted our expectations to be in line with their published Q4 results. We are below Bloomberg consensus on TCE revenues and 22% below on EBITDA. Our sailed-in VLCC spot rate forecast for the quarter is USD19.4k/day, compared to Euronav’s reported USD25.9k/day and DHT’s USD19.6k/day.
HOLD recommendation reiterated but target price cut to NOK33. Our new target price is based on 1.10x (down from 1.25x, as peers have acted on growth opportunities at what we consider a low point in the market cycle, leaving Frontline behind in terms of size in the VLCC segment) our 1-year forward NAV of NOK30 (previously NOK35) and assuming flat asset values one year forward. We calculate a current NAV of NOK33 (previously NOK35).
HOLD