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Stolt-Nielsen: Upside seems limited after the rally

Stolt-Nielsen posts its 4Q19 results next Thursday. We are not anticipating large differences in figures QoQ, as the rates remained relatively stable, while the explosion in Ulsan must have also had a negative impact. There were no major news during the quarter, while the full impact of IMO-2020 regulations and improved rates will only be felt in the present year. We decided to downgrade our recommendation to Hold with an increased NOK 140/sh Target Price as the upside seems limited after the share rally.

No major differences in figures QoQ projected

Stolt-Nielsen’s 3Q19 figures came in basically flat QoQ, supporting beliefs that the chemical tanker market has bottomed out and we are expecting 4Q numbers to also have a little deviation QoQ, nevertheless, to come slightly higher. There was no exact figure communicated of the impact of an explosion in Ulsan and we expect USD 1m one-off cost & slightly lower revenues for the quarter due to this. The rates remained rather stable during the quarter, while no positive movement in US-China trade war and the beginning of a lower season should be reflected in Stolt Tank Containers division.

IMO-2020 regulations materialised

A month has passed already with the new IMO-2020 regulations. While up to 20 scrubbers were communicated to have been installed into Stolt’s vessels, it will be interesting to hear whether there have been no problems in inserting the new bunker-surcharge clauses into the re-negotiated contracts as during 3Q19 presentation it was said that there still is a substantial number of contracts that needed re-negotiation.

More on Stolt Tankers IPO?

The company returned to talking about the IPO for Stolt Tankers in 3Q19 presentation – the segment was communicated to be prepared for the exclusion from other segments. This will be interesting to follow, if anything is reported upon.

The stock added 20% since our last update and we struggle to see a much larger upside. Our Target Price is raised to NOK 140/sh up from NOK 125/sh, but the recommendation is downgraded to Hold.
Source: Norne Research

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