GOGL - Q2/18e: Buy the ticket before the season starts (buy:$12)


Golden Ocean Group Ltd.

Arctic Buy
Market Cap: USD 1324m
Price/Target: USD 9.2/USD 12.0
P/E 18: 9.2x
P/E 19: 5.9x
EV/EBITDA 18: 7.9x
EV/EBITDA 19: 6.1x

Q2/18e: Buy the ticket before the season starts

Following the recent uptick in rates and values, we raise our target to USD 12/share (11) ahead of the strong season and reiterate our Buy recommendation. While we do not expect any surprises in the Q2 report (we are 5% above Consensus on EBITDA), we have raised our Capesize rate forecasts and lifted our 2018-’19 EBITDA estimates by ~10%, leaving us 24-30% above consensus. Fundamentals pointing to a strong H2, a strong balance sheet with healthy liquidity, a modern fleet with Capesize focus and a management competent in executing on strategically correct deals, are factors that trigger our interest in GOGL’s equity. Our target reflects a premium of ~15% and a 10% increase in values.

· Q2/18e EBITDA of USD 49m, P/NAV 1.03x - On the back of blended TCE rates of USD 14.3k/day, we expect GOGL to report TC revenues of USD 98.3m with an EBITDA of USD 48.7m and a net profit of USD 7.1m (0.05/share). We expect GOGL to declare a dividend of USD 0.1/share for the second quarter (unchanged from Q1). Our Q2/18 NAV for GOGL is USD 8.9/share (NOK 73.6/share), with a USD 1.5/share (NOK 12.2, or 16.5%) sensitivity to a 10% increase in asset values. We estimate that every USD 1k/day increase in rates generates an additional EPS of USD 0.16 in 2019, reflecting substantial upside potential to earnings and dividend distributions.

· Rates entering peak season on a high note - After hovering around the USD ~15k/d mark from mid-May until the end of June, Capesize rates have been showing considerable strength. While spot rates have climbed steadily to USD 26.4k/d for the largest bulkers, the FFA market has seen hefty gains as well. Since mid-June, the Cape Q3 and Q4/18 FFA contracts have gained USD ~6.7k/d and USD ~2.5k/d to USD ~25.4k/d and USD ~25.7k/d. The rate sentiment is hot, and market prospects are further pointing to a strong H2/18. As such, we have entered the peak season on a high note, and by looking at historical seasonality, there could certainly be more to come. We raise our Capesize rate estimates to USD 24k, 30k and 24k/d for Q3/18 (22k/d), Q4/18 (20k/d) and 2019 (22k/d).

· We are 15-30% above consensus on 2018-‘19 EBITDA for Capesize owners – We apply our revised rate estimates to the Capesize owners in our coverage universe, and raise our FY’18 and FY’19 EBITDA estimates by by ~6-22%. Given the large exposure to the Capesize segment, Golden Ocean is the company that benefits the most from our revised rate assumptions. We are 15-30% above consensus on FY’18 and FY’19 EBITDA, and we expect to see estimates ticking higher as we head into the peak season for dry bulk shipping.

Best regards,

Jo & Lars Bastian
Arctic Securities AS
Redigert 07.08.2018 kl 09:49 Du må logge inn for å svare
KJEPET
07.08.2018 kl 10:00 2373

Tusen takk Sa2ri. Herlig lesing dette. Ser det er enda mer optimistiske og skriver "We estimate that every USD 1k/day increase in rates generates an additional EPS of USD 0.16 in 2019". Da blir det utbytter så det holder fremover.

Kjøperne holder seg fortsatt lang unna GOGL, og shorterne får utløst stoplos raidene sine helt etter planen:-) Men som vi ser av både rater og skipsverdier er det en nytteløs kamp. Får si som Trygve sier "vannet renner nedover" :-)

Det blir spennende å se fremover hvordan de nye kravene (2020) til svovelinnhold i drivstoff vil påvirke kursen. Dette er elementer som bør inkluderes i meglerhusenes vurderinger. Kostnadene kan øke med opptil 20 000 dollar i døgnet for enkelte skip, noe som er betydelig. Installering av skrubbere vil også utgjøre en kostnad man må ta med i vurderingene.
Kbkristi
07.08.2018 kl 11:02 2216

Ja, nå skal det bli moro framover. Dagens korreksjon passet meg utmerket, så nå er alle løse tamper festet :)
Det ser foreløpig ut som short-angrepet er ganske så mislykket.
Schenk
07.08.2018 kl 13:22 1948

Dombishawa. Du mener vel ikke seriøst at kostnadene pr skip i døgnet kan øke med 20 000 USD ? Det er jo omtrent lik hele inntekten p.t og helårsnivå nærmere 60 mill kr pr skip pr år !! Vennligst vær litt mer presis i hva du skriver
Schenk
07.08.2018 kl 13:22 1945

Dombishawa. Du mener vel ikke seriøst at kostnadene pr skip i døgnet kan øke med 20 000 USD ? Det er jo omtrent lik hele inntekten p.t og helårsnivå nærmere 60 mill kr pr skip pr år !! Vennligst vær litt mer presis i hva du skriver

Schenk - da må jeg nesten be deg sette deg inn i hva lavsvovelkravet på 0,5% representerer i konkrete kostnader for rederiene før du karakteriserer meg som upresis. Legg merke til at jeg skriver opptil 20 000 pr. døgn - snittet vil helt sikkert ligge lavere (avhengig av skip), men uansett dette blir betydlige tilleggs kostnader. Det er derfor underlig for meg at meglerhusene ikke tar dette inn over seg i sine estimater.
Schenk
07.08.2018 kl 13:49 1850

Takk for svar Domboshawa. Du har dekning for det du sier i artikkelen.
Jeg kjenner ikke shipping så godt, men i et velfungerende marked vil det vel ikke ensidig være rederne som blir sittende med netto regningen på dette. Med forventet tilsig (netto) skip, vil vel ratene vil vel bli presset oppover (med noe negativ effekt på verdenshandel), da rederne må tjene penger i de "gode årene" som vi forventer bulk inn i nå.
Idar1
07.08.2018 kl 17:55 1557

Kan det hende at noen av skipene allerede har skrubber installert ?

Det er trolig en god del skip allerede med scrubber i GOGLs flåte og andre vil få det etterinstallert. Da kan man fortsatt brenne høysvovel bunkers. Det er dyrt å installere scrubbere, men billigere enn å kjøpe diesel på så nye båter. Gamle skip blir kanskje heller vraket.

For de som er interessert, fra et GOGL-prospekt fra 2017:
"The current global sulphur cap is 3.5% and there are several options to reduce Sulphur emissions:
• exhaust cleaning (“scrubbers”);
• run the main engine on low sulphur fuel; or
• run the main engine on gas (LNG, LPG, ethane).
We believe the latter alternative is unacceptable for bulk carriers and retrofits due to costs.
58
Scrubbers are designed to clean the exhaust emissions for sulphur and as such, one can continue operating the main
engine on residual fuel oil. The costs for scrubbers vary with ship type/size and are assumed to cost between USD 2 and
3.5 million. In addition, a scrubber increases fuel consumption by about 3% to 5%.
The other alternative is to run the main engine on a low sulphur fuel. Today this means running on marine gas oil. This
has a cost implication as the gas oil premium to residual fuel oil on average is about 160 USD/mt. However, back in 2012-
2014, whilst crude oil prices were hovering around 100 USD/bbl, the premium was in region of 400 USD/mt. It is therefore
quite clear that this option has a major cost consequence.
Finally, there is an open question linked to low sulphur residual fuel oil. There are products on the market meeting the
coming cap, although availability is limited. A key question here is what the refining industry intends to do about the
approximately 250 million tonnes of residual fuel oil that is supplied to the merchant fleet annually. Crack the fuel oil to
lighter distillates or desulphurise the fuel to meet the cap. At the time of writing there is no clear answer to these
questions. "

Jeg klarte ikke å finne en oversikt over hvilke skip som har fått installert scrubber, kanskje andre vet det?
Idar1
07.08.2018 kl 18:06 1521

Takk
Da er det vel naturlig at skrubbere vil bli installert ved neste klassing for de skipene som ikke har om skrubbere kan oppdrives og det blir funn økonomisk forsvarlig
farmern
07.08.2018 kl 19:13 1408

Flott å eie Wärtsila gjennom Investor AB også når det kommer til scrubbers :)

A major European liner shipping company has placed an order for scrubber systems with Finland's Wärtsilä for a total value of EUR 170 million. The customer is MSC, sources tell ShippingWatch. With the order, Wärtsilä will install the systems and retrofit the box carrier's container ships. The order involves open as well as closed loop scrubber systems. "Our exhaust gas cleaning system will not only help our customers’ vessels run on lower emissions but significantly improves the air quality and emission level in coastal and sea areas in general," says Marcus Ljungkvist, General Manager of Project Sales at Wärtsilä Services in the press release. Several shipping companies have in recent months announced their preferred solutions to complying with the global sulfur directive, and the scrubbers, which clean sulfur from ships' exhaust, seem to be gaining favor with a growing number of stakeholders.

/offtopic
Redigert 07.08.2018 kl 19:17 Du må logge inn for å svare