Epic Gas: Stronger-than-predicted results and first-ever dividends
Solid cost control, despite Covid-19 impact, let Epic Gas report stronger results this morning than we predicted. The global LPG seaborne macro trends were revised down but not as pessimistic as forecast during 3Q20, while the recovery in 2021 is still expected. First-ever dividends were proposed by the company of USD 0.14069/sh. The combination with Lauritzen Kosan should be finished by end-1Q21. Following the more positive report than we predicted we are likely to raise our estimates and keep our Buy recommendation for the stock.
Better results than predicted following not as bad macro situation as feared
Despite somewhat increased expenses due to Covid-19 related to crew change, Epic Gas had a solid cost control that led to one of the highest EBITDA figure ever – USD 14.3m (USD 10.0m predicted by us). While we were mentioning only 0.4% growth of global LPG seaborne trade in 2020, this scenario did not materialize and the trends were revised to 1.1% growth. The outlook for 2021 remains positive with a forecast of 2.4% growth in seaborne LPG and a related 5.1% growth in tonne-mile demand, compared to an expected +3.8% for pressurized vessel capacity and +1.8% for semi-refs.
IMO 2030 target already achieved
IMO has targeted a 40% reduction in carbon intensity by 2030 compared to 2008. Epic Gas states that the company has already achieved this target by end-2020 and we value this on a very positive side as not only this is an important and much-valued initiative, but this should also lead to lower expenditure going forward.
Dividends of USD 0.14069/sh proposed, combination with Lauritzen Kosan to be closed by end-1Q
Surprisingly, Epic Gas decided to propose USD 0.14069/sh dividends, the first dividends ever, that provides a solid 7.4% dividend yield. Also, the company repeated that the grand combination with Lauritzen Kosan A/S to create BW Epic Kosan is still on track and is expected to be closed by end-1Q. Our estimates still reflect only Epic Gas’ part until the deal is official and more financial information is released and for Epic we are likely to raise our estimates somewhat following a solid report, while our positive stance for the stock should be reiterated.
Source: Norne Research