Take the money and run

A leading equity analyst has downgraded shares of Ship Finance International (SFI) despite a powerful performance on Wall Street.

JP Morgan analyst Jonathan Chappell

In a note to clients, Jonathan Chappell at JP Morgan cut his rating to "neutral" from "overweight" but maintained his price target of $22.

"We believe the company's recently announced credit facility re-financing and the consistency and security of its dividend have played a large role in the material share-price outperformance," writes the analyst.

Chappell says the NYSE-listed shipowner has been the best performing tanker stock he has covered in recent months, but expressed doubts in the company's ability to take advantage of growth opportunities.

"We believe new projects will be limited in the near term by the company's still highly levered balance sheet," he said.

While investors are pleased with SFI's dividend policy, Chappell says a dividend increase in the near-term is unlikely due to flat earnings forecasts.

"Consequently, we recommend taking profits of SFI following its recent strength and redeploying the funds in stocks with more attractive yields," writes the analyst.

As TradeWinds has reported, the John Fredriksen company is in the process of refinancing a loan tied to fleet expansion. (Click HERE to read the article in full)

Ship Finance International controls a mixed fleet of 66 vessels including crude and chemical tankers, combination carriers (OBOs), and offshore support vessels (OSVs).

Shares in SFI were down 2.24% to $18.79 in midday trading.

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