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Odfjell: Guidance suggests a very strong quarter

Odfjell reports its 4Q22 figures on Wednesday’s evening. We have been waiting for the results from the main competitors to have our view towards the chemical tanker market reassured prior to issuing an update. And now we are even more confident about the guided very strong quarter for the company. Buy is reiterated under an unchanged NOK 100/sh Target Price as the turn in the cycle is yet to arise, but not in the nearest future in our view.

Improved quarter for Tankers guided

We follow the company’s guidance and believe that 4Q22 could break the records again with slightly improved TCE earnings and stable Terminals. Swing tonnage impact is still expected to be reducing, while the shipping distances following the war in Ukraine are projected to remain on the higher levels compared to pre-war situation. Our confidence was also heightened following the main competitor’s Stolt-Nielsen’s strong results last week. We anticipate the bottom line to again exceed USD 50m and we do not differ from the overall consensus.

Safe signals from competitors

With Stolt-Nielsen reporting an improvement in the chemical tanker rates and expecting a continued strengthening of the chemical tanker market following little growth in fleet, we suggest that the core chemical tanker operator Odfjell could benefit even more. 4Q should have marked the contract renewable period as well and we are eager to hear how the company succeeded in increasing the rates.

Record dividends ahead?

If the 4Q22 marks the same bottom line as the previous quarter, we are to witness the highest dividends for the company in 20 years. Combined with NOK 2.25/sh paid after 1H22, we anticipate an annual dividend yield surpassing 10%.

We stick to the symbolic NOK 100/sh Target Price for the stock and reiterate Buy recommendation. The cyclical downturn is not yet to be approached, in our view.

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Source: Norne Research

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