Clarksons: (sorry for grammar, copy pase uit pdf werkt niet best)
Undeserving of low valuation
Although Euronav’s stock is up 10% YTD, the stockstillhas significantmore room to go, in our view. We estimate NAV at $12.40/share and implied value of $74m for a prompt VLCC newbuild, among the lowest valuations in the peer group. With only 35% LTV and more than $1bn of liquidity we findthe balance sheet as very strong. In other words, even if the tanker market were to stay weaker for longer than expected, the risk is skewed to the upside, we argue.The company in our view is exceptionally well-placed to potentially generate outsized returnsfor shareholdersgiven its low valuation, strong balance sheetand thelarge fleetand leading position in the industry. We reiterate our BUY rating and $16 target price.
1Q21 below consensusEuronav reported EBITDA of $21m vs. our $22m but below consensus at $29m (Refinitiv). Average VLCC spot earnings came in at $14,000/day and Suezmax at $11,500/day. By comparison we had assumed $15,000/day for VLCCsand $10,000 for Suezmax. Euronav declaredits minimum dividend of 3 cents for the quarter. Ex-dividend date is May 20th. At the end of March 2021, Euronav had liquidity of $1.1 billion comprised of $149m cash and $969m undrawn committed credit facilities.2Q21 bookingsEuronav said it has booked 48% of spot VLCC days at $10,000/day for the second quarter. Suezmaxeshavebeen booked at $10,500/dayon averagefor 41% of available days. Our 2Q21 forecast is $15,000 and $10,000 daily for VLCC and Suezmax, respectively. At this point we do not make any changes to our 2Q estimates as we see it likely that vessel earnings could be closer to $20,000/day in the latter part of the quarter as OPEC+ volumes start to have an impact on the market balance.Company’s market outlookIn the report, Euronav offered a constructive view on the marketsaying thatatapering of production cuts from OPEC+shouldhelp improve the market. In an interesting update on scrapping, the company said the lack of scrapping can partly be tied to the use of old ships in so-called “illicit trade that has developed around Iranian and Venezuelan sanctioned cargoes”. Such trade appears to have been “policed less effectively in the past few quarters than previously.” The company quotes broker estimates that this relates to 66 VLCCs and 29 Suezmaxes that otherwise could have been scrapping candidates, they believe.ValuationWe estimate current NAV at $12.40/share. At our $40,000/day VLCC estimate for 2022, we project Euronav could generateEPS of $1.10. At $55,000/day, which is our 2023 estimate, the company could earn $2.52 per share. Given the 80% payout policy of EPS, this would correspond to dividend yields of 10% and 25% for 2022 and 2023, respectively.Our market outlookOPEC+ announced in early April that the group would start to reverse part of the 7.5 mb/d cuts in place, with 2.1 mb/d of oil production expected to come back to the market from May to July. Based on expected improvements to world oil demand in the second half of 2021, the IEA says another 2 mb/d is needed on top of that. Hence, we could see around 4 mb/d be restored by yearend. Using the old rule-of-thumb that 1 mb/d requires 25 VLCCs on the AG-East route, we believe the tanker market is bound to see a sharp turnaround in the months to come.