Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Now that the initial/primary low has been established and with the S&amp;P 500 roughly 20% off the lows, we believe it is time to map out potential areas where this rally could run into resistance. After this type of major waterfall decline there is often a test of the initial low - and there is often an undercut of the initial low. Barring approval of a first-line therapy for COVID-19 (chloroquine/hydroxychloroquine?) we are of the belief that a test of this initial low (likely 2-12 weeks out) and potentially an undercut of roughly 10% are likely.

Now that the initial/primary low has been established and with the S&amp;P 500 roughly 20% off the lows, we believe it is time to map out potential areas where this rally could run into resistance. After this type of major waterfall decline there is often a test of the initial low - and there is often an undercut of the initial low. Barring approval of a first-line therapy for COVID-19 (chloroquine/hydroxychloroquine?) we are of the belief that a test of this initial low (likely 2-12 weeks out) and potentially an undercut of roughly 10% are likely.

Amid rising Middle East tensions, investors have moved to safe-havens including Treasuries and gold, all while having a muted effect on the US equity market. At this point in time, the rising tensions have done virtually no damage to the bullish trends and indicators that continue to dominate the market. In today’s report we highlight attractive Groups and stocks within Manufacturing, Services, Technology, and Transportation: Aero Defense, Large-Cap, HR &amp; Employment Svcs, Large-Cap, Optical Equipment, and Shipping, Energy

Amid rising Middle East tensions, investors have moved to safe-havens including Treasuries and gold, all while having a muted effect on the US equity market. At this point in time, the rising tensions have done virtually no damage to the bullish trends and indicators that continue to dominate the market. In today’s report we highlight attractive Groups and stocks within Manufacturing, Services, Technology, and Transportation: Aero Defense, Large-Cap, HR &amp; Employment Svcs, Large-Cap, Optical Equipment, and Shipping, Energy

U.S. Equity Strategy: Bullish Outlook Intact

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.

Equity Bottom-Up

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Back to profitability; earnings to soar with recovery: In the latter months of 2018, tanker freight rates surged substantially across vessel classes due to improving seasonal demand. Accordingly, DHT’s VLCC earnings in 4Q18 came in at USD 34,900pd – 50.4% higher than the rates realised in 4Q17. The company reported TCE revenue of USD 85.2m, compared with our estimate of USD 80.6m. Reported EBITDA surged 83% to USD 61.3m in 4Q18, compared with USD 33.5m in 4Q17. The company returned to profitability with net income of USD 11.9m in 4Q18, compared with a loss of USD 2.2m in 4Q17. The management stated during their call that DHT has booked 67% of its spot VLCC days at USD 37,200pd in 1Q19, which is 73.8% higher than the rates realised by DHT’s VLCCs in 1Q18. We estimate DHT’s TCE revenue to grow at a CAGR of 23.3% from USD 214.1m in 2018 to USD 401.4m in 2021. Net loss is expected to narrow down from USD 46.9m in 2018 to USD 3.9m in 2019. We estimate net income of USD 53.3m in 2020, which is expected to soar to USD 128.5m in 2021. We assign a fair value of USD 5.15 per share for DHT’s stocks and maintain our view as Attractive on the back of expanding revenue and increasing profitability.</li></ul>


Back to profitability; earnings to soar with recovery: In the latter months of 2018, tanker freight rates surged substantially across vessel classes due to improving seasonal demand. Accordingly, DHT’s VLCC earnings in 4Q18 came in at USD 34,900pd – 50.4% higher than the rates realised in 4Q17. The company reported TCE revenue of USD 85.2m, compared with our estimate of USD 80.6m. Reported EBITDA surged 83% to USD 61.3m in 4Q18, compared with USD 33.5m in 4Q17. The company returned to profitability with net income of USD 11.9m in 4Q18, compared with a loss of USD 2.2m in 4Q17. The management stated during their call that DHT has booked 67% of its spot VLCC days at USD 37,200pd in 1Q19, which is 73.8% higher than the rates realised by DHT’s VLCCs in 1Q18. We estimate DHT’s TCE revenue to grow at a CAGR of 23.3% from USD 214.1m in 2018 to USD 401.4m in 2021. Net loss is expected to narrow down from USD 46.9m in 2018 to USD 3.9m in 2019. We estimate net income of USD 53.3m in 2020, which is expected to soar to USD 128.5m in 2021. We assign a fair value of USD 5.15 per share for DHT’s stocks and maintain our view as Attractive on the back of expanding revenue and increasing profitability.

DHT Holdings Inc - Focus on Large Crude Carriers and Growing Long-Haul Trade

Thematic (Sector/Industry)

The crude tanker market remained weak in the initial nine months of 2018 as vessel earnings remained below breakeven across vessel classes. However, elevated scrapping activity during the year kept a check on fleet growth, and vessel earnings improved in the fourth quarter of 2018. Unlike others, the stocks of Frontline and DHT Holdings generated an overall return of 20.5% and 9.2% in 2018, respectively. The stocks moved on anticipated lines following our upgrade in August 2018. Few stocks such as Frontline and DHT Holdings crossed our fair value estimate. However, all stocks plunged in December 2018 due to the sell-off pressure on New York exchanges.The tanker market has bottomed out in 2018, and we expect a gradual recovery over the next three years as a higher number of demolitions will facilitate market re-balancing by limiting the supply side growth. We expect the stocks to gradually follow the upward trajectory in the second half of 2019 given the optimistic outlook and hence, have awarded ‘Attractive’ rating to tanker stocks under our coverage.

The crude tanker market remained weak in the initial nine months of 2018 as vessel earnings remained below breakeven across vessel classes. However, elevated scrapping activity during the year kept a check on fleet growth, and vessel earnings improved in the fourth quarter of 2018. Unlike others, the stocks of Frontline and DHT Holdings generated an overall return of 20.5% and 9.2% in 2018, respectively. The stocks moved on anticipated lines following our upgrade in August 2018. Few stocks such as Frontline and DHT Holdings crossed our fair value estimate. However, all stocks plunged in December 2018 due to the sell-off pressure on New York exchanges.The tanker market has bottomed out in 2018, and we expect a gradual recovery over the next three years as a higher number of demolitions will facilitate market re-balancing by limiting the supply side growth. We expect the stocks to gradually follow the upward trajectory in the second half of 2019 given the optimistic outlook and hence, have awarded ‘Attractive’ rating to tanker stocks under our coverage.

Tanker Shipping - 2019Gradual Recovery on Horizon

Equity Analyst

Nikesh Shukla

The worst is behind us We believe that we have reached the bottom of the crude tanker shipping market. While we don’t expect rates to reach anywhere close to the levels seen in 2015 later this year, we believe that the ingredients are in place for the market to see a gradual improvement in vessel earnings over the next two years. Beyond that, an improvement in earnings will be predicated how the orderbook evolves as well as on OPEC’s production levels which are currently not at a level sufficient to employ crude tankers at profitable levels.

The worst is behind us We believe that we have reached the bottom of the crude tanker shipping market. While we don’t expect rates to reach anywhere close to the levels seen in 2015 later this year, we believe that the ingredients are in place for the market to see a gradual improvement in vessel earnings over the next two years. Beyond that, an improvement in earnings will be predicated how the orderbook evolves as well as on OPEC’s production levels which are currently not at a level sufficient to employ crude tankers at profitable levels.

Is It Time to Bottom-Fish Crude Tanker Stocks?

United States

DHT Holdings, Inc. is an independent crude oil tanker company.  The company provides transportation services to oil companies and trades internationally with a fleet of crude oil tankers in the VLCC, Aframax and Suezmax segments.

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Dht Holdings (DHT US)

U.S. Equities: Test Of The Lows Coming?

Now that the initial/primary low has been established and with the S&P 500 roughly 20% off the lows, we believe it is time to map out potential...

Vermilion Research

U.S. Equity Strategy: Bullish Outlook Intact

Amid rising Middle East tensions, investors have moved to safe-havens including Treasuries and gold, all while having a muted effect on the US...

Vermilion Research

DHT Holdings Inc - Focus on Large Crude Carriers and Growing Long-Haul Trade

Back to profitability; earnings to soar with recovery: In the latter months of 2018, tanker freight rates surged substantially across vessel...

Drewry Maritime Financial Research

Tanker Shipping - 2019Gradual Recovery on Horizon

The crude tanker market remained weak in the initial nine months of 2018 as vessel earnings remained below breakeven across vessel classes....

Drewry Maritime Financial Research

Is It Time to Bottom-Fish Crude Tanker Stocks?

The worst is behind usWe believe that we have reached the bottom of the crude tanker shipping market. While we don’t expect rates to reach anywhere...

Drewry Maritime Financial Research

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