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Odfjell: Signals of a strong quarterly results

Odfjell reports next Thursday, and we anticipate strong results following the company’s guidance, competitor’s report and supposedly increasing chemical tanker rates. Therefore, we decided to keep Buy recommendation for the stock, despite the strong growth lately. The market’s fundamentals are strong, while we project rising freight rates to outpace the growth of fuel costs.

All the signs let us expect a strong report

It was a very solid 1Q22 report from Odfjell, but we are expecting even more this time. The company guided stronger results in the second quarter with the optimistic longer-term expectations as well. The main competitor Stolt-Nielsen recently reported its superb results for the quarter, especially in the Tanker segment, which is much more emphasized in Odfjell, presenting strong chemical tanker rate movement during the quarter. As we have heard about the improving situation in rates from some third parties as well, the figures are expected to reflect the situation.

What can go wrong now

The geopolitical tension is now the highest in several decades with Russia attacking Ukraine and China marching not far from Taiwan’s borders. However, the chemical tanker market seems resilient there and even comes out as the winner due to the reduced swing tonnage pressure. As for the inflation, it seems that the rising freight rates tend to outpace the speed that the fuel costs grow. And yet, there can be no calmness when we talk about the war, whether the real one or the price war.

Odfjell now is the dividend case

After the approved policy of 50% adjusted net profit as further pay-outs and our increased estimates, we now anticipate 6-8% dividend yield for 2022 and further. We are still confident about the chemical tanker market’s improvement and expect more triggers ahead. Thus, Buy is again reiterated for the stock at NOK 65/sh TP.

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Source: Norne Research

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