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BW Epic Kosan: Rates had a nice pushup during the quarter

BW Epic Kosan posts its report next Thursday. Stable and net profitable quarter is anticipated by us seeing the unusually intensive and rather positive market rate development during the quarter. We increased our Target Price for the stock following both the increasing rates and the weakening NOK vs. USD, but we still suggest that the stock is fairly priced, thus Hold is reiterated.

We project a stronger quarter QoQ
After a somewhat weaker 4Q22, we anticipate the results not to disappoint us when reported next Thursday. Although the market rate development does not directly translate into revenues, it is like a beacon of directory for the changes to take place. This quarter, the market rates had unusually high positive motion – for different size groups, the rates increased by 1-5% QoQ, explained by higher activity and pricing levels in Asia. Thus, we anticipate revenues to increase up to USD 91.3m and EBIT to USD 9.0m. The bottom line is expected not move around a breakeven level, but to prove us right about the improving market.

Positive view looking forward
The company states in its annual report that 2023 began with the good signs for residential LPG demand. There are positive expectations for a gradual recovery in China, which will drive petrochemical activity, and the USA’s ethylene exports remain strong. BWEK anticipates a 2.9% growth in LPG seaborne trade over 2023, while the smaller gas vessel fleet is expected to grow by 2.3% before scrapping.

Recommendation reiterated, share rather strong recently
High energy prices in an inflationary environment did not move away and the risk is still there. Nevertheless, we have upped our estimates and the Target Price. However, the share price has been strong recently and the upside remains limited, thus, Hold recommendation is reiterated.
Source: Norne Research

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