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Epic Gas: Bottom line still in a positive territory

After an impressive 3Q18 Epic Gas was anticipated to keep up its solid performance in 4Q. Although delivered figures were somewhat lower than we expected, overall results were solid and the bottom line remained in a positive territory. The outlook – supply and demand situation in pressurized LPG market – remains promising, thus we made no significant changes to our estimates and our long term positive view towards the share is reiterated with unchanged NOK 15/sh Target Price.

Reported figures lower QoQ, but still solid

Epic Gas posted 4Q18 report last Thursday with revenues 3% below our estimates (USD 39.4m vs. USD 40.7m expected). Seasonal delays negatively impacted the figures and EBIT came in at above USD 5m level, but below our estimated USD 6.4m. Due to reduced interest expense after refinancing, Epic delivered the bottom line in a positive territory for a second quarter in a row.

Supply/demand outlook remains positive

The year 2018 ended with a total of 329 pressurized non-Chinese vessels on water, including 6 newbuilds delivered during the year and 5 vessels scrapped. There are 5 newbuilds scheduled to be delivered in 2019 and 5 in 2020, while 16 ships are 28+ year old and are potential scrapping candidates, therefore, a net reduction is estimated in the pressurized vessel supply. In the competitive smaller-sized semi-ref market we have a similar situation with the ordered 5 newbuilds and 22 potential scrapping candidates. As for LPG demand, global seaborne trade is estimated to have grown 2.6% in 2018, but the growth rate is expected to improve in the nearest future (+6.4% in 2019, +4% annualy afterwards projected by Drewry). The U.S. remains the largest exporter of LPG, while the demand is strongly growing not only in key demand countries like India and China, but also, mostly for domestic use, in developing Asian countries, namely, Bangladesh and Indonesia.

Buy is reiterated after a solid quarter

Although lower than we expected, figures for the quarter were still solid and the outlook for the market remains positive. Thus, we made only minor changes to our estimates and our Buy recommendation at an unchanged NOK 15/sh Target Price is reiterated.
Source: Norne Research

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