VLCCF branded ‘buy’

A leading Wall Street equity analyst believes now is the time to accumulate shares of Knightsbridge Tankers.

On Friday Noah Parquette of Canaccord Genuity upgraded the bulker operator’s Nasdaq-quoted stock to “buy” from “hold”.

In a note to clients the forecaster said the revision reflects the belief that rates in the capesize specialist’s core market will firm in the fourth-quarter.

“Knightsbridge focuses purely on the capesize segment, which is highly leveraged to the fast-growing iron ore trade,” the analyst explained.

“Chinese iron ore imports are on pace to grow 12% this year as low-cost capacity in Australia has displaced domestic production.

“Looking out ahead, expected growth in Brazilian production should drive ton-mile growth (Brazil-China is three times the distance as Brazil-Australia) relative to expected supply growth of around 5 to 6% annually through 2016.”

Parquette also pointed out that Knightsbridge pays what he described as a “substantial” quarterly dividend, which currently stands at $0.20.

Going forward the researcher believes there is “significant room” for the payout to expand and said he wouldn’t be surprised to see a 50% increase by 2016.

Shares of Knightsbridge soared 7.89% before topping out at around $11.24 in the hour leading up to the close but observers note the stock lost traction in afterhours trading.

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