Spring and summer might impact 2Q results, but LT expectations are solid
BW Epic Kosan reports next Tuesday. With the spot activity significantly lower during the warmer months of the year, we do not anticipate revenues to hit the record-high levels once again, still expect a solid overall report from the company. We project the LPG space to benefit from the energy crisis as the higher demand should lead to more shipments. Thus, we reiterate Buy recommendation with somewhat lower short-term estimates, but improved long-term expectations.
Seasonality kicks in
BW Epic Kosan posts its 2Q22 results next Tuesday. Following the monthly small gas carrier market assessment reports from the company, we saw the spot activity levels declining during the warmer months of spring and summer. The rates were little changed during the period. Therefore, we anticipate a somewhat weaker quarter for the company, but still a solid one with USD 7m bottom line, the level to be dreamed about couple of years ago. Nevertheless, we increased our long-term estimates, namely for 2023, seeing the ongoing energy crisis with countries cutting ties with Russia, and expecting the LPG shipping companies to come out as winners due to higher demand.
Fundamentals are strong, Buy reiterated
There are five more newbuilds scheduled for delivery this year, with an expected net fleet growth of 2.8% before any further scrapping, lower than the forecasted 3.7% LPG seaborne trade growth, which is positive. We are also assessing war in Ukraine, which seems to have a little impact for BWEK, contrasted by Covid-19 measures in China, where the market’s recovery was slower than expected. All in all, we reiterate Buy for BW Epic Kosan’s stock ahead of the report seeing the company in the promising part of the business cycle.
Source: Norne Research