US owner International Seaways (INSW) is poised to see earnings and asset values rise on the back of the expected tanker recovery, according to Clarksons Platou Securities.
And the Norwegian investment bank is upbeat on the stock price whether John Fredriksen’s move to become the biggest shareholder last month results in some form of merger or not.
Analysts Frode Morkedal and Even Kolsgaard calculate that if ship values reach newbuilding parity in better 2023 markets, the shipowner’s net asset value (NAV) could hit $46 per share, against $28.20 today.
Clarksons Platou has a “buy” rating on the company and has raised its target price to $40.
The stock was down 11% to $20.19 in after-hours trading in New York, however.
Frontline owner John Fredriksen became the largest shareholder in April, with a 16.7% stake.
This helped reduce the discount to NAV, Clarksons Platou believes.
“We remain positive on the tanker market and see INSW as an attractive bet on the recovery,” Morkedal and Kolsgaard said.
The analysts see “significant operational leverage” and a product tanker division that is currently performing well.
The US company is continuing efforts to optimise its fleet.
Older ships offloaded
The only two panamaxes, built in 2002 and 2004, have been scrapped, and all four 2006-built handysize vessels have been sold.
Including the latest sale of an MR, six vessels have been recycled, and 17 have been sold since June 2021.
The fleet is still relatively old compared to peers, Clarksons Platou argues, and few vessels have scrubbers.
And with current high fuel prices, earnings are likely to lag peers with newer fleets, the investment bank added.
But Clarksons Platou says a five-year-old MR tanker is 7% behind newbuilding parity, while a 15-year-old sister lags 38%.
And the container sector has shown what strong markets can do for asset values as the price of older ships have soared beyond newbuilding parity.
Takeover deterred
Regarding Fredriksen’s intentions for the company, the analysts said: “Whether this is a financial investment or another potential merger candidate remains to be seen.”
“INSW has historically traded with a discount to NAV, but has traded well after the news broke and could potentially close the gap to NAV in a consolidation drive," they added.
Seaways has this week implemented “poison pill” measures when anyone acquires 17.5% or more in the company.
The stockholder rights plan would effectively stop an investor from owning more than this level by penalising the shareholder with heavy stock dilution through new rights issues.
The company does not oppose a takeover as long as the price is favourable, but does not assess the current share price as fair.
