Transport Sector, China and Asia-focused Research

Charles De Trenck

Event-Driven

Shipping, specifically LPG tanker shipping, made headlines this week with a takeover offer via an all-stock transaction from <a href="https://www.smartkarma.com/entities/21082" target="_blank" data-smartkarma-citation="entities:21082:1">BW LPG Ltd (BWLPG NO)</a> (in Norway, but controlled by the Singapore-based Sohmen-Pao family) for US-listed <a href="https://www.smartkarma.com/entities/19102" target="_blank" data-smartkarma-citation="entities:19102:1">Dorian Lpg Ltd (LPG US)</a>.For a quick summary of the proposed combined company of BW LPG and Dorian LPG please read the media <a href="https://www.hellenicshippingnews.com/bw-lpg-looks-to-acquire-hadjipateras-led-dorian-lpg-in-a-deal-worth-1-1-billion/" target="_blank">media stories</a> first. Then, for more on the offer direct from BW, please refer to the <a href="http://www.bwlpg.com/Media/May-2018-(1)/BW-LPG-PROPOSES-TO-COMBINE-WITH-DORIAN-IN-ALL-STOC" target="_blank">summary proposed offer</a>.BW LPG is already the largest VLGC (very large gas carrier) player, but there are good reasons for BW LPG to move on Dorian LPG. And there may be additional drivers coming into play.We look at recent history and current issues &amp; drivers in our update.

Shipping, specifically LPG tanker shipping, made headlines this week with a takeover offer via an all-stock transaction from BW LPG Ltd (BWLPG NO) (in Norway, but controlled by the Singapore-based Sohmen-Pao family) for US-listed Dorian Lpg Ltd (LPG US).For a quick summary of the proposed combined company of BW LPG and Dorian LPG please read the media media stories first. Then, for more on the offer direct from BW, please refer to the summary proposed offer.BW LPG is already the largest VLGC (very large gas carrier) player, but there are good reasons for BW LPG to move on Dorian LPG. And there may be additional drivers coming into play.We look at recent history and current issues &amp; drivers in our update.

Shipping Consolidation: BW LPG Bids for Dorian LPG in $1.1bn EV Valuation

Equity Research Analyst, Maritime sector, Drewry Maritime Financial Research

Ankush Kathuria CFA, FRM

Equity Research Analyst, Maritime sector

Maritime Sector, Equity & Credit Research

Drewry Maritime Financial Research

With no ties to other players in the shipping, finance or banking world, we provide a uniquely impartial view of the markets and companies we cover. Our parent organization, Drewry is a leading independent provider of research services to the maritime and shipping industry, employing over 100 professionals across an international network of offices in London, Delhi, Singapore and Shanghai. Combining our market-leading resources with seasoned sector expertise DFRS offers a highly differentiated and comprehensive range of investment and financial research services to lenders and prospective investors in publicly listed maritime and shipping companies. The full service of reports, supporting resources and sector orientated webinars provides our clients with the most complete picture of the organisations under coverage as is possible. We have been charting and analysing the world’s maritime markets for more than 40 years. This unrivalled intelligence and understanding provides the foundation of our research service. Our analysts have access to one of the most up-to-date, comprehensive and reliable sources of market insight and research data available today. We look at globally listed companies within the following sectors: Port Operators, Container Shipping, Container Manufacturing & Leasing, LNG Shipping, Dry Bulk Shipping and Tanker Shipping. Combine in-depth sector expertise with financial analysis focusing on over 50 stocks globally.

Thematic (Sector/Industry)

<ul><li>Vessel oversupply, which was the major cause of distress for LPG ship owners in 2017, will moderate over the next couple of years and will pave the way for recovery. We believe LPG shipping is past its cyclical bottom and the market imbalance should improve soon. Hence, we have turned positive on the sector, and that should reflect in share prices.</li><li>We expect tonne-mile vessel demand to outpace growth in tonne-mile supply, helped by the improved vessel utilisation rates on the back of growing long-haul LPG trade. Strengthening market conditions will also boost freight rates. In turn, the recovery in freight rates will support asset prices that could tick upwards if the recovery is robust in winter.</li><li>Valuations for LPG shipping stocks are attractive, and with fundamentals for 2018 getting better, we believe it is opportune to accumulate LPG shipping stocks. The LPG shipping stocks are trading below their net asset values. At current share price, we believe the upside potential is material and the probability of a downside is limited. Hence, we recommend investors to accumulate LPG shipping stocks and have accorded an Attractive rating to BW LPG (BWLPG NO), Navigator Holdings (NVGS US) and Stealth Gas (GASS US).</li></ul>

Vessel oversupply, which was the major cause of distress for LPG ship owners in 2017, will moderate over the next couple of years and will pave the way for recovery. We believe LPG shipping is past its cyclical bottom and the market imbalance should improve soon. Hence, we have turned positive on the sector, and that should reflect in share prices.We expect tonne-mile vessel demand to outpace growth in tonne-mile supply, helped by the improved vessel utilisation rates on the back of growing long-haul LPG trade. Strengthening market conditions will also boost freight rates. In turn, the recovery in freight rates will support asset prices that could tick upwards if the recovery is robust in winter.Valuations for LPG shipping stocks are attractive, and with fundamentals for 2018 getting better, we believe it is opportune to accumulate LPG shipping stocks. The LPG shipping stocks are trading below their net asset values. At current share price, we believe the upside potential is material and the probability of a downside is limited. Hence, we recommend investors to accumulate LPG shipping stocks and have accorded an Attractive rating to BW LPG (BWLPG NO), Navigator Holdings (NVGS US) and Stealth Gas (GASS US).

LPG Shipping Outlook – Past the Bottom of the Cycle

Equity Bottom-Up

Earnings falter on weak spot rates; reduce fair value to NOK 36: BW LPG reported a decline of 8% y/y in TCE income to USD 91.4m in 2Q17, as the decline in spot rates negated the impact of a larger fleet. Daily earnings for VLGCs declined to USD 20,300 in 2Q17 compared to USD 28,100 in 2Q16, and USD 21,000 in 1Q17, while its fleet increased by 12 VLGCs during the same period. A decline in revenues also hurt company’s earnings as EBITDA plummeted to USD 39.6m from USD 52.3m in 2Q16; it was also…

Earnings falter on weak spot rates; reduce fair value to NOK 36: BW LPG reported a decline of 8% y/y in TCE income to USD 91.4m in 2Q17, as the decline in spot rates negated the impact of a larger fleet. Daily earnings for VLGCs declined to USD 20,300 in 2Q17 compared to USD 28,100 in 2Q16, and USD 21,000 in 1Q17, while its fleet increased by 12 VLGCs during the same period. A decline in revenues also hurt company’s earnings as EBITDA plummeted to USD 39.6m from USD 52.3m in 2Q16; it was also…

BW LPG (BWLPG NO) – Supply Pressures Hit Earnings but for How Long?

BW LPG  (BWLPG NO, Neutral, NOK 40) – 1Q17 A better reading than 4Q16, but headwinds persist<ul><li>
Vessel earnings stabilising, but clearly lower than last year:The TCE income was down 31% y/y to USD 94.7m as higher bunker costs exacerbated the losses due to a decline in daily vessel earnings. The average daily TCE earnings for VLGCs in 1Q17 were USD 20,900 compared to USD 38,600 in 1Q16. The positive aspect was that the average TCE for the company’s VLGC fleet was same as 4Q16 despite higher voyage…</li></ul>

BW LPG  (BWLPG NO, Neutral, NOK 40) – 1Q17 A better reading than 4Q16, but headwinds persist
Vessel earnings stabilising, but clearly lower than last year:The TCE income was down 31% y/y to USD 94.7m as higher bunker costs exacerbated the losses due to a decline in daily vessel earnings. The average daily TCE earnings for VLGCs in 1Q17 were USD 20,900 compared to USD 38,600 in 1Q16. The positive aspect was that the average TCE for the company’s VLGC fleet was same as 4Q16 despite higher voyage…

BW LPG  (BWLPG NO, Neutral, NOK 40) – 1Q17 A Better Reading than 4Q16, but Headwinds Persist

Energy Expert

Thierry Bros, PhD

Thierrybros.com

Brexit negotiations are likely to start soon. Everyone is looking at the consequences on forex and on the UK financial sector. But who could benefit from decorrelation of energy prices between the UK and the EU?Following the policy paper " <a href="https://www.oxfordenergy.org/publications/brexits-impact-gas-markets-brext-security-supply-uk-ireland/" target="_blank">Brexit's impact on gas markets: Brexit and security of supply for the UK and Ireland</a>" just published by Oxford Institute for Energy Studies, this insight looks at the Brexit's impact on energy stocks.As the outcome of Brexit is still unknown, we can only draft…

Brexit negotiations are likely to start soon. Everyone is looking at the consequences on forex and on the UK financial sector. But who could benefit from decorrelation of energy prices between the UK and the EU?Following the policy paper " Brexit's impact on gas markets: Brexit and security of supply for the UK and Ireland" just published by Oxford Institute for Energy Studies, this insight looks at the Brexit's impact on energy stocks.As the outcome of Brexit is still unknown, we can only draft…

Norway

BW LPG Limited provides safe, reliable and cost-efficient maritime transportation solutions to customers. The Company links areas of supply and demand globally with its fleet of LPG carriers, which is managed by experienced officers and crew. BW LPG is operating out of Singapore and its fleet operates on a combination of spot voyages, contracts of affreightment, and time charters.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

BW LPG Ltd (BWLPG NO)

Shipping Consolidation: BW LPG Bids for Dorian LPG in $1.1bn EV Valuation

Shipping, specifically LPG tanker shipping, made headlines this week with a takeover offer via an all-stock transaction from BW LPG Ltd (BWLPG NO)...

Charles De Trenck

LPG Shipping Outlook – Past the Bottom of the Cycle

Vessel oversupply, which was the major cause of distress for LPG ship owners in 2017, will moderate over the next couple of years and will pave...

Drewry Maritime Financial Research

BW LPG (BWLPG NO) – Supply Pressures Hit Earnings but for How Long?

Earnings falter on weak spot rates; reduce fair value to NOK 36: BW LPG reported a decline of 8% y/y in TCE income to USD 91.4m in 2Q17, as the...

Drewry Maritime Financial Research

BW LPG (BWLPG NO, Neutral, NOK 40) – 1Q17 A Better Reading than 4Q16, but Headwinds Persist

BW LPG (BWLPG NO, Neutral, NOK 40) – 1Q17 A better reading than 4Q16, but headwinds persist Vessel earnings stabilising, but clearly lower than...

Drewry Maritime Financial Research

Energy: Who Could Benefit from Brexit?

Brexit negotiations are likely to start soon. Everyone is looking at the consequences on forex and on the UK financial sector. But who could...

Thierry Bros, PhD

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)