JPM endorses DLPG

An equity analyst at JP Morgan has initiated research coverage of Dorian LPG, a Connecticut-based owner of nearly two dozen very large gas carriers (VLGCs).

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According to regulatory filings he and John Lycouris, the CEO of affiliate Dorian LPG (USA), have been involved in the management of shipping companies for more than three decades.


In a client briefing Nishant Mani branded the operator’s New York-quoted shares with an “outperform” rating and set a price target of $24.00.

“We believe that Dorian offers investors the ability to leverage the fundamentally attractive LPG shipping space, with a significant ‘baked-in’ growth component in an orderbook of 19 vessels delivering through and optionality to a higher rate environment,” he said.

The forecaster applauded what he described as a “balanced chartering strategy” and “conservative balance sheet position” that, in his opinion, will deliver “more attractive risk-adjusted returns throughout the cycle”.

Mani acknowledged that the overall orderbook in Dorian’s core market has “grown considerably” in recent months and could weigh on the VLGC segment in the long-term but argued that the sector will remain strong through 2015.

The analyst told investors the owner intends to fix approximately 33% of its newbuildings on time charters upon delivery in an effort to provide revenue visibility and reduce market exposure, which suggests it will still be in a position to capture upside if spot rates spike.

The researcher also pointed out that freight rates have topped $90,000 per day and said he expects the rally to continue in the near-term but believes daily levels will fall to $43,000 on average in 2015 and 2016, an estimate he described as a “base case” for the spot market.

Dorian LPG, which is led by chief executive John Hadjipateras and trades under the symbol “LPG”, oversees 22 VLGCs and one small, pressurized gas carrier. The total includes 19 newbuildings that are due for delivery at various intervals over the next few years.

Earlier in the day the company said hull numbers 2656 and 2657, which are under construction at Hyundai Heavy Industries in South Korea, are scheduled to hit the water in July and September of this year, respectively.

Upon completion the former, which will be named Comet, is due to commence a five-year charter with Shell. According to the announcement the latter, which will be called the Corsair, is still unfixed and will likely trade in the spot market.