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Stolt-Nielsen: Strong USD and positive momentum let us keep Buy recommendation

Stolt-Nielsen posts its 3Q (June-August) report this Thursday and as usual cuts the ribbon to the quarterly reporting season. We anticipate the strong tone set last quarter to continue following the stable-to-positive moves in the chemical tanker space, while the positive stance towards the stock is reiterated anticipating that we have not yet reached the top of the high cycle. Fundamentals point to a solid future as well, while until this the company focuses on the sustainability-related decisions.

A repeat would be nice

Following the superb last quarter, both we and consensus anticipate Stolt-Nielsen to deliver similar figures. The company previously communicated of positive momentum expectations through the rest of the year for the chemical tankers, while the Tank Containers might see a demand fall due to high transportation costs but should still enjoy good margins. Not to be forgotten the other pillars of the company – Stolt Sea Farm’s summer months are typically accompanied by higher demand for high quality seafood, while there is no reason for any significant decline in the Terminals utilization.

Initiatives and solutions linked to sustainability

While the upcycle is ongoing, Stolt-Nielsen focuses on the sustainability side:

Stolthaven Terminals’ facility in Moerdijk, Netherlands has achieved two key credentials in the past month: the International Sustainability & Carbon Certification (ISCC) and certification to store CAT-3 products in its tanks and warehouse
Fluxys, Advario Stolthaven Antwerp and Advario Gas Terminal have joined forces to study the feasibility of building an open-access green ammonia import terminal at the Port of Antwerp-Bruges
Stolt Tankers joined the Clean Hull Initiative (CHI). The CHI was launched earlier this year to focus on the issue of biofouling (the build-up of marine growth on the hulls of ships). The CHI is led by Norwegian non-profit environmental NGO, the Bellona Foundation and brings together key stakeholders from across the shipping industry, the public sector and wider society. The group is focused on the development and implementation of an industrywide, recognised and accepted standard for proactive hull cleaning in international shipping.
Following a successful trial earlier this year onboard the Stolt Breland, Stolt Tankers has signed an agreement to fit an additional seven ships with Yara Marine’s FuelOpt propulsion optimisation technology
Although none of these initiatives translates directly to the P&L, it might be a good start for the cleaner tomorrow which we also support.

Buy reiterated under stronger USD

Strong USD added to the increased Target Price of NOK 275/sh stock (NOK 250/sh). We still believe there is a significant upside for the share as the top spot of the cycle is not reached in our opinion, while the other segments are either stable or improving. Thus, Buy is reiterated.
Source: Norne Research

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