Tanker king Fredriksen and his associates have been negative on the crude sector for which he is most famous of late, most notably with Tor Olav Troim comparing the state of the market with the Black Death in 2011.

Frontline 2012 had amassed an orderbook of 62 vessels, comprising 34 capes and a series of products tankers and VLGCs at the end of 2013.

While it has 10 VLCCs and suezmaxes trading, having taken them as part of a rescue deal at Frontline in 2011, it has resisted ordering such tonnage despite its financial riches.

Today, as Frontline 2012 reported a profitable fourth quarter, there was the first hint that it is open for crude expansion.

“Most shipping markets are in the early stage of a cyclical revival, as fleet growth is expected to fall below recent levels for the next several years, while a stronger global economy revives growth in tonnage demand,” it said.

It added: “The recent increase in crude tanker rates, which began in the second half of last year, is a sign of an improved balance in the crude tanker market and the company expects that the supply/demand balance will improve further. This creates opportunities in the crude segment also.

“However this is a fine balance which can easily be changed by increased fleet supply caused by increased ballast speed, decrease in vessel scrapping and aggressive newbuilding ordering.” 

Frontline 2012 has been conspicuous by its absence in the VLCC orders rush which started in August. Owners, largely backed by public money, contracted 50 VLCCs in 2013.

Next stop New York

The owner says its next play will be a New York IPO for its capesize fleet, a plan which it first mentioned in its second quarter report for 2013.

The "cape-yield" company, with relatively low leverage, will list stateside in the second or third quarter of this year, Frontline 2012 said today.

 

Some have suggested the existing platform of Knightsbridge Tankers will play a part in the listing of the cape fleet.

Frontline 2012 says it has added four more newbuildings so far this year.

Erik Nikolai Stavseth of Arctic Securities says it now has 38 capesizes on its books. Eight of those are in question given they are being built at STX.

Stavseth said: “With FRNT ‘Cape-Yield’ now materializing, we find the investment case in FRNT to be even clearer than before.

“We argue a dividend yield pricing of FRNTs capesize fleet will lift valuation substantially and in our base case earnings of $25,000 per day for capes in 2015/2016, we find more value in FRNT ‘Cape-Yield’ than the whole of FRNT trades at today.”

Dividend already in place

Frontline 2012, in which Fredriksen’s Hemen Holdings controls a 46% stake, is paying a dividend of $0.05 per share for a quarter in which it made a profit of $12.5m.

It included a gain of $8.8m on its VLGC venture Avance Gas.

Earnings per share of $0.05 however lagged the $0.10 consensus as income from its trading crude tankers fell short of expectations.

For the full year Frontline 2012 recorded a profit of $69.5m, beating the $8.1m of a year ago.

Its bottom line included a $30.3m gain following the cancellation of its legacy VLCC newbuildings.