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

Encouraging supply-side outlook: Market dynamics for the coaster segment (p/r, 1-12k cbm) are relatively better with lower supply, when compared with VLGCs (f/r, 70k cbm) and Handysizes (s/r, 12k+ cbm). The fleet growth in the coaster segment was 4.1% in 2016, compared with 23% in the VLGC segment and 24% in the Handysize segment. Furthermore, the current orderbook for coaster vessels is significantly lower than that of the larger vessels, which will restrict the vessel supply in the coming…

Encouraging supply-side outlook: Market dynamics for the coaster segment (p/r, 1-12k cbm) are relatively better with lower supply, when compared with VLGCs (f/r, 70k cbm) and Handysizes (s/r, 12k+ cbm). The fleet growth in the coaster segment was 4.1% in 2016, compared with 23% in the VLGC segment and 24% in the Handysize segment. Furthermore, the current orderbook for coaster vessels is significantly lower than that of the larger vessels, which will restrict the vessel supply in the coming…

DMFR – LPG Shipping – Coaster Segment – Dawn on the Horizon?

Even though the market capitalisation of LPG shipping players has shrunk sharply, the valuations on forward basisare necessarily not cheap. With earnings expectations pared down, investors are unlikely to lap up the LPG shipping stocks, and hence, they will remain range-bound. We do not see investors willing to accord higher multiples, and we believe the share prices could trade within a range. Hence, we have trimmed our valuation forecasts and our base case is a Neutral stance on LPG shipping…

Even though the market capitalisation of LPG shipping players has shrunk sharply, the valuations on forward basisare necessarily not cheap. With earnings expectations pared down, investors are unlikely to lap up the LPG shipping stocks, and hence, they will remain range-bound. We do not see investors willing to accord higher multiples, and we believe the share prices could trade within a range. Hence, we have trimmed our valuation forecasts and our base case is a Neutral stance on LPG shipping…

DMER - LPG Shipping 2.0 - BW LPG, GASS US and NVGS US, Valuations Uncompelling Despite Correction

Coaster Market Could Improve from Here; FY17 Earnings More Relevant<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/009/099/original/st1.JPG?1465517969" class="editor-image img-responsive" data-smartkarma-image-id="9099"></figure>• Supply contraction can provide support to coaster market: Freight rates and utilisation rates remained under pressure during the first quarter, and we do not expect any sharp turnaround in the near term. That said, since the segment is close to its bottom, it is unlikely that freight rates will decline significantly from the current level. There is a high likeliness of vessels being demolished considering the age profile of the…

Coaster Market Could Improve from Here; FY17 Earnings More Relevant• Supply contraction can provide support to coaster market: Freight rates and utilisation rates remained under pressure during the first quarter, and we do not expect any sharp turnaround in the near term. That said, since the segment is close to its bottom, it is unlikely that freight rates will decline significantly from the current level. There is a high likeliness of vessels being demolished considering the age profile of the…

Stealth Gas (GASS US) - Coaster Market Could Improve from Here; FY17 Earnings More Relevant

Greece

StealthGas, Inc. engages in the provision of international energy seaborne transportation services to liquefied petroleum gas sectors. Its owns fleet of vessels that carry petroleum and petrochemical gas products in liquefied form such as propane, butane, butadiene, isopropane, propylene, and vinyl chloride monomer. The company was founded in December 2004 and is headquartered in Athens, Greece.

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StealthGas Inc (GASS US)

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

DMFR – LPG Shipping – Coaster Segment – Dawn on the Horizon?

Encouraging supply-side outlook: Market dynamics for the coaster segment (p/r, 1-12k cbm) are relatively better with lower supply, when compared...

Drewry Maritime Financial Research

DMER - LPG Shipping 2.0 - BW LPG, GASS US and NVGS US, Valuations Uncompelling Despite Correction

Even though the market capitalisation of LPG shipping players has shrunk sharply, the valuations on forward basisare necessarily not cheap. With...

Drewry Maritime Financial Research

Stealth Gas (GASS US) - Coaster Market Could Improve from Here; FY17 Earnings More Relevant

Coaster Market Could Improve from Here; FY17 Earnings More Relevant• Supply contraction can provide support to coaster market: Freight rates and...

Drewry Maritime Financial Research

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