Will Liquidity Issues Continue to Haunt Teekay Tankers?

Is It Time to Bottom-Fish Crude Tanker Stocks?

DMFR – Teekay Tankers – Stormy Seas Ahead as Earnings Expected to Remain at Very Low Levels

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

Teekay Tankers Ltd Class A / Equity Bottom-Up

<ul><li>
<strong>Earnings </strong><strong>and profitability to expand with gradual recovery:</strong> Teekay Tankers’ (TNK’s) TCE revenues for 3Q18 increased 27.3% y/y to USD 92.2m on the back of an expanded fleet after Tanker Investment Limited’s (TIL’s) acquisition. The adjusted EBITDA surged 49.3% to USD 27.4m in 3Q18 from USD 18.5m in 3Q17. However, the company recorded a higher adjusted net loss of USD 17.5m in 3Q18, compared with the adjusted net loss of USD 14.6m in 3Q17. For 4Q18, TNK has fixed 59% of its Suezmax days at USD 19,000pd, 54% of its Aframax days at 19,900pd and 42% of its LR2 days at USD 17,000pd. Freight rates on these fixtures are relatively higher than the rates realised in 4Q17. We estimate TNK’s TCE revenue to expand 35.1% y/y to USD 114.5m, whereas we expect the adjusted EBITDA to surge 62.2% from USD 30.1m in 4Q17 to USD 48.9m in 4Q18. With a recovery in the tanker market, TNK’s TCE revenue estimates are expected to grow at a CAGR of 7.5% to ~USD 475m in 2021, whereas the adjusted EBITDA is estimated to surge from USD 114.5m in 2018 to USD 223m in 2021. Accordingly, we maintain our fair value estimate of USD 1.30 per share and reiterate our Attractive stance on the company’s stock.</li></ul>


Earnings and profitability to expand with gradual recovery: Teekay Tankers’ (TNK’s) TCE revenues for 3Q18 increased 27.3% y/y to USD 92.2m on the back of an expanded fleet after Tanker Investment Limited’s (TIL’s) acquisition. The adjusted EBITDA surged 49.3% to USD 27.4m in 3Q18 from USD 18.5m in 3Q17. However, the company recorded a higher adjusted net loss of USD 17.5m in 3Q18, compared with the adjusted net loss of USD 14.6m in 3Q17. For 4Q18, TNK has fixed 59% of its Suezmax days at USD 19,000pd, 54% of its Aframax days at 19,900pd and 42% of its LR2 days at USD 17,000pd. Freight rates on these fixtures are relatively higher than the rates realised in 4Q17. We estimate TNK’s TCE revenue to expand 35.1% y/y to USD 114.5m, whereas we expect the adjusted EBITDA to surge 62.2% from USD 30.1m in 4Q17 to USD 48.9m in 4Q18. With a recovery in the tanker market, TNK’s TCE revenue estimates are expected to grow at a CAGR of 7.5% to ~USD 475m in 2021, whereas the adjusted EBITDA is estimated to surge from USD 114.5m in 2018 to USD 223m in 2021. Accordingly, we maintain our fair value estimate of USD 1.30 per share and reiterate our Attractive stance on the company’s stock.

Teekay Tankers – Attractive Valuation Ahead of Recovery in Tanker Space