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BW Epic Kosan: Stability is the aspiration, not the burden

BW Epic Kosan reports 3Q22 results next Tuesday. We expect stable results from the company stating this as a positive message in the otherwise volatile markets. Our Target Price for the stock was lowered mostly due to the increased Risk-Free Rate in our valuation, but Hold recommendation is reiterated. Uplisting the stock might improve currently low liquidity, but as far as we know, nothing firm is decided yet, although the company seems to be ready.

Stable rates in monthly assessment reports signal a flat quarter

Nothing dramatic at all is anticipated in BWEK’s results next week, however, stability in current markets should be valued positively. Following the flat LPG shipping rates in the monthly assessment reports and having in mind that the higher bunker prices are either transferred to the customers through contracts or being taken into account when signing, we expect a positive net profit for yet another quarter.

Concerns are neither about China nor Ukraine

The largest concerns in the shipping world could have been the situation with the Covid-19 measures in China and the war in Ukraine. However, after Epic Gas joined BW Kosan, the dependency on China significantly reduced, while the company itself stated that they had only one ship transferring LPG from Ukraine and Russia to Turkey and Mediterranean, but now it is taken out and used elsewhere, thus any impact is minimal. The largest concern as communicated by BWEK is the slowdown in economy and inflation, but this is somewhat offset by the promising vessel supply situation, as inflation translates into cost and supply chain issues in building new ships, therefore, companies with the full fleet are winning.

TP down on changes in valuation model

We reduced the TP for the stock to NOK 22/sh (26) following the increase in Risk-Free rate in our model. Hold is reiterated. As far as we know, the company is interested in uplisting, which might improve the liquidity, and the reporting manner is already as OSE requires, but nothing firm was announced.

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Source: Norne Research

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