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Stolt Nielsen – BUY NOK 165 (prev. BUY 150) – Very strong performance from all the segments

Stolt-Nielsen surprised us on the positive side with its 3Q (June-August) figures and the improvement QoQ was throughout all the segments, with the largest in Tank Containers and Sea Farm. The overall market outlook remains positive as well. We raised our estimates and the Target Price for the stock to NOK 165/sh (NOK 150/sh previously) and reiterate Buy recommendation.

Very strong performance of Tank Containers and Sea Farm

Stolt-Nielsen as usual breaks the ice of the reporting season and somewhat points the direction for the others by reporting the earliest due to a different month allocation. The company posted very strong June-August figures last week. At Stolt Tankers there was a recovery in contract nominations following the negative winter freeze impact and the company was less reliant on the low paying spot market, which has not yet shown signs of recovery. Despite USD 8.3m increase QoQ in the bunker prices, Tankers reported USD 24.1m EBIT, which, even if adjusted for a net gain of USD 3.6m related to the sale of one ship, is very solid. Stolthaven Terminals were rather stable. Stolt Tank Containers’ markets continued to show strength with rising freight rates and higher demurrage revenue compensating for the rising costs. At Stolt Sea Farm the strong demand for both turbot and sole led to increased sales volume and solid increases in prices during the traditionally strong summer season with the first production from Portugal adding to the whole harvest picture. Overall, the company’s revenues including JV came in at USD 593m vs. our expected USD 545m, while adj. EBIT tremendously beat our and the market’s expectations and was at USD 75.9m (USD 44.3m our, USD 40.6m consensus projections).

All good but the tanker rates, which should improve any time now

Overall outlook remains positive. We share the same view with the company, that the supply side in the chemical tanker segment looks very favourable and it is just a matter of time before the further strengthening in the market. Terminals are expected to stay stable at currently high utilization level. Stolt Tank Containers were guided to continue their strong performance in the coming quarters, while Sea Farms were said to be performing even beyond expectations with lower average cost of production and higher output levels. Although nothing was mentioned on the spun-off of the segment, the Sea Farm is proving to be a very important part of the company and is improving its presence in the income statement with every quarter.

We raised our estimates after a very solid report and the Target Price for the stock increased to NOK 165/sh from NOK 150/sh previously. We see the supplementary segments helping out the Tankers at the time being, while the market situation signals for an anytime growth in Tanker rates, thus we suggest the upside remains rather significant and reiterate Buy recommendation for the stock.
Source: Norne Research

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