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Stable 4Q expected for Stolt-Nielsen; long-term positive stance retained

Stolt-Nielsen posts its 4Q18 (September-November) report next Thursday. Seasonally weaker quarter is projected by us, however we encountered a recovery in Chemical Tanker rates by the end of the quarter, while the drop in the oil price should reduce bunker costs. We have upgraded our recommendation from Hold to Buy in the last report after an unjustified drop in the share price and now keep the positive stance towards the stock intact with an unchanged NOK 135/sh Target Price.

Chemical Tanker market improved by the end of 4Q

We saw an improvement in chemical tanker rates at the end of Stolt-Nielsen’s 4Q18 (ends November 30th), which is in line with the more optimistic view from its competitors rather than guidance from SNI of a weak market until late 2019. However, 4Q18 results should be seasonally lower for Chemical Tankers, but more or less in line with previous quarter for other segments. We anticipate total revenues of USD 532m and EBITDA of USD 116m. Net earnings are projected to come in the positive territory once more with EPS of USD 0.18.

USD 17m of USD 30m Share Buy-back completed

Stolt-Nielsen continues its share buyback programme spending NOK 13m during 4Q18 and 1Q19. Overall, the company has purchased stocks for around USD 15m (under 8.5 USDNOK rate) in the restarted programme and still has around USD 13m to spend in order to reach the authorized USD 30m level.

Buy with unchanged Target Price reiterated

We remain positive towards Stolt-Nielsen’s stock, supported not only by the recovering rates, but also the reduction in the oil price, which should have a positive impact for the company providing lower bunker costs, while IMO regulations in 2020 are expected to have only limited impact, as the increased costs due to cleaner fuel were communicated to be transferred to customers. We expect USD 0.25/sh dividend level to be kept following the report and keep our Buy recommendation and NOK 135/sh Target Price unchanged.
Source: Norne Research

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