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Epic Gas: Positive stance reiterated prior to 2Q19 results

Epic Gas posts its 2Q19 results on Wednesday. The company has recently strengthened its leading position in the pressurized vessel market with the order of four modern second-hand carriers, but this will be reflected in figures only starting in the second half of the year. Second quarter’s numbers are not anticipated to deviate much QoQ, but the long term outlook is positive for the sector. We have increased our Target Price to NOK 17/sh mostly due to stronger USDNOK and reiterate Buy recommendation for the stock.

Little deviation QoQ is expected

Epic Gas posts 2Q19 report next Wednesday. Figures are anticipated to little deviate from the first quarter’s numbers – we anticipate USD 41m in revenues and USD 12m in EBITDA. The bottom line might come up to a positive territory, but just a small step into it is projected. We saw relatively stable shipping rate development during the quarter for all the 3,500cbm, 5,000cbm and 7,500cbm size vessels, but finally an improvement in Handysizes (11,000cbm) was reported – although back to 2H18 figures, but the gradual improvement throughout the period eases the pressure somewhat, knowing that the new orders are also of this segment.

Strong market outlook supports our positive long term view

The situation in LPG market remains positive – global LPG production and consumption are forecasted to significantly grow during the next decade (production to reach 360m tonnes from 308m tonnes in 2017), while the seaborne levels are also projected to show strong improvement in the same time. Demand being healthy, the pressurized vessel supply seems profitable for the company with already strong fleet, as only two 3,500cbm vessels, eight 5,000cbm and one 11,000cbm newbuild should be delivered until 2021 from Japanese yards. The number of the oldest vessels being potential scrapping candidates still exceeds the number of newbuilds almost twice. Following the similar situation in the competing smaller-sized semi-refs and IMO-2020 regulations just around the corner, we keep our positive stance towards the Epic Gas’ stock with slightly upped TP (NOK 17/sh from NOK 16/sh) reflecting stronger USD versus NOK.
Source: Norne Research

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