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BW Epic Kosan – BUY NOK 22 (prev. BUY 20) – 1Q Preview: A start of a new era for the company

BW Epic Kosan, which we all knew as Epic Gas previously, is reporting its 1Q21 results next Wednesday. Due to uncertainty on accounting we present our expectations of the old part of the company for 1Q and add the projections of BW Kosan’s figures starting in 2Q, which might be changed if some other structure is revealed during the presentation. 1Q should be somewhat weaker for the company due to lower number of operating days and significantly increased oil price, but a more distant future looks solid and we reiterate Buy for the share at NOK 22/sh Target Price.

1Q21 expected somewhat slower

As the union with BW Kosan was finalized towards the end of the quarter, we decided to show the prognosis for the “old” part of the company, Epic Gas, and will adjust our model if any other way of reporting is presented next week. While the pressurized LPG shipping rates were rather stable throughout the quarter, we encountered a significant recovery in the oil price at the beginning of this year, which resulted in the lower margin expectations.

No longer Epic Gas

The transaction with Lauritzen Kosan to receive the gas carrier division, combine fleet and business activities and create BW Epic Kosan was finalized and closed on 11th March, 2021. Lauritzen Kosan has contributed 34 gas carriers to Epic Gas’s fleet of 42 pressurised gas vessels, in addition to certain other assets, in exchange for new shares in Epic Gas. Therefore, BW Epic Kosan currently has 48 various-sized pressurized LPG carriers, 9 smaller semi-refs and 19 Ethylene/chemical carriers. Post-completion of the related share issue, there were 152,510,755 shares issued. BW Group Limited remained the largest shareholder of the Company with 58% of the shares, followed by Lauritzen Kosan A/S with 26% of the shares.

It is hard to predict how the company re-shapes after the transition to somewhat broader waters, while we are also keen to see how the new reporting structure will look like. Still, our current calculations point to a solid upside and we reiterate Buy recommendation at a higher NOK 22/sh Target Price.
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Source: Norne Research

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