Clarksons ups Avance, Arctic trims outlook

Morkedal gets more positive on Oslo-listed LPG owner; Stavseth puts sector under review.

Clarkson Platou Securities upgraded its rating on shares of Avance Gas while Arctic Securities signalled it could cut its expectations for the LPG carrier sector as a whole.

The divided opinions came after Oslo-listed Avance reported worse-than-expected fourth-quarter earnings and shocked the market with a dividend cut.

_KE12418.jpg Frode Morkedal

Clarkson Platou’s Frode Morkedal hiked his rating on Avance’s shares to “buy” from “neutral” as he declared that its valuation is “too attractive to ignore”.

“Although we share the belief that rates are likely to soften, we have actually increased our 2016 spot rate estimate from $54,000 to $65,000 per day as we see less harmful impact on tonne-miles from the Panama Canal expansion, which is further delayed,” he said in a note to clients.

But Arctic Securities’ shipping analyst, Erik Nicolai Stavseth, warned that he could reduce his outlook for the sector as he cut his price target for Avance’s shares for the second time in a week.

He said the sector is poised for review after he revisited his market model for the sector, which show the potential for declining asset values.

That and the potential for lower divided led him to reduce his price target NOK 120 ($13.97) from NOK 130, after chopping it from NOK 160 over the weekend. He still kept a “buy” rating on the stock.

Skies getting darker

While he kept his very large gas carrier (VLGC) rate estimate at $45,000 per day for this year, he said there are “growing clouds” on the horizon for large LPG ships.

“We see increasing risk of US LPG production rolling over with no growth in 2016/2017 (or worse: a decline in production) as crude oil prices stay low,” he said in a note on rival Aurora LPG, though he also kept its rating at “buy”.

“The lack of additional volumes for exports will in our view put pressure on VLGC rates given then influx of tonnage.”

Below estimates

Earlier today, Avance reported a $45.1m fourth-quarter profit, slightly below the $46.9m consensus estimate.

As TradeWinds reported earlier today, Aurora and Avance were among the largest declining shipping stocks in Oslo today.

Aurora LPG shed 10.5% to end the day at NOK 45.2 ($5.28). Avance Gas saw its shares plunge 8.9% to NOK 81.5, an improvement on a deeper decline earlier in the day.

 

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