US owner DHT Holding’s double VLCC sale beat broker price estimates to help build its cash buffer as rates weaken again.
The company said it had agreed to offload the 298,000-dwt DHT Hawk (built 2007) for $40m and the DHT Falcon (built 2006) for $38m this week.
Clarksons Platou Securities valued the vessels at $38m and $37m respectively, 4% lower than the “firm” sales price.
Valuation platform VesselsValue has the Hawk at $36m and the Falcon at $34m.
The buyer has not yet been named but DHT is booking a profit of $12m from the transactions once it repays debt, and will net $65m in cash.
The company had $58m in cash at the end of March.
Clarksons Platou expects DHT’s cash balance to be $135m by the end of June.
Analysts Frode Morkedal and Even Kolsgaard said: “Because of the fleet’s earnings capability, low financial leverage, and timely period charters, DHT has significant financial strength to withstand the current market weakness.”
But they added: “The sale of older vessels improves the fleet’s fuel and carbon metrics, but fewer vessels results in lower earnings estimates, all else being equal.”
The company has 24 VLCCs left and is not ruling out further disposals of older ships.
Low breakeven figure
Clarksons Platou assesses the company’s breakeven levels as one of the sector’s lowest at $15,000 per day.
DHT has booked 69% of second quarter days at $24,800 per day, including the six VLCCs on fixed time charters at $33,000.
In the spot market, this implies a relatively firm $20,000, but recent weakness suggests the actual figure could be lower than this, the analysts believe.
First quarter Ebitda of $14m was lower than consensus of $17m, due to slightly lower revenue, as VLCC spot earnings were $11,900 per day versus the Clarksons Platou forecast of $12,600.
Discount to net asset value
The stock is trading near its 52-week low, and the analysts estimate a 25% discount to the current net asset value of $6.60 per share.
“DHT offers one of the most appealing risk/reward bets on the VLCC market,” Morkedal and Kolsgaard added.
“With fleet growth slowing to a trickle while oil production rises, we believe it is only a matter of time before the tanker market returns to normal earnings levels,” they said.
The investment bank has a “buy” rating on the stock, with a target price of $10.
The share closed up nearly 9% at $5.48 in New York on Tuesday.
