Belships: Older vessel pricing improved; changes in LHN ownership

Belships reports its 1Q24 results next Wednesday. Since our last update the company announced adding two more vessels to the fleet in 2028, bringing the total number to 40 (30 operating, 10 to be added later). Improved ship values and stronger USD strengthened the case, but divestment of LHN Pte was completed at a lower price than we expected, although more information is very much awaited during the presentation. We adjusted the Target Price a tad upwards to NOK 30/sh, while Buy recommendation is reiterated.

Solid contract coverage in 2024

The last announcement revealed that Belships has 81% of 1Q24 days fixed at USD 17k/d rate and respectively 42% days of 2Q24 fixed at USD 16.3k/d average rate, 28% days of 3Q24 at USD 16.5k/d and 21% days of 4Q24 at USD 16k/d rate. Seeing flat to somewhat positive spot rate movement during the quarter, this strengthens our view towards the 1Q report with EBITDA from the main segment of shipping operations projected to reach around USD 45m level.

Two new vessels to join the fleet in 2028

Belships has expanded its newbuilding programme with two new 64k dwt Ultramaxes, which will be delivered in 2028. The vessels are leased on similar terms as previously announced transactions, and Belships is not required to make any down payments for these vessels. The company now has a total of 10 newbuildings under construction at Japanese shipyards with delivery between 2024 and 2028, while the current fleet consists of 30 ships.

Change in ownership of Lighthouse Navigation

Belships has entered into an agreement to divest its stake of 50% in Lighthouse Navigation Pte Ltd against a cash consideration of around USD 13-15m which will be paid over the next 15 months. As part of the transaction, Belships has acquired 33% of the shares in Lighthouse Navigation Management AS, increasing Belships’ ownership to 67%. LHN Pte operated mainly in Asia, while LHN Management operates mainly in the Atlantic and shares an office with Belships in Oslo. As from 2Q24, the reported and consolidated results from Lighthouse Navigation will only be from the Atlantic operating company. Our valuation suggested the cash consideration north of USD 20m over the same terms, therefore, the sum to be received, dilutes the valuation somewhat. However, more information is very much awaited in the report, as we had problems already with forecasting the LHN segment and our current estimates might be adjusted again.

Older vessel values increased

There was a substantial improvement in the vessel pricing. According to Fearnleys, five year old Ultramax is worth around USD 34m, which is almost the same as the new order (USD 35m). This, together with USD 27.5m valuation of 10y Ultramax, had a positive impact for our NAV calculation. In addition, stronger USD vs. NOK improved our valuation, thus, we reiterate Buy for the stock at a NOK 30/sh TP, implying >15% upside.
Source: Norne Research