BW Epic Kosan reports next Tuesday. After a strong 1Q21, we anticipate solid 2Q21 figures to follow. Notably, this will be the first full quarter with Lauritzen Kosan’s part included into the company’s results. The market was overall stable during the quarter and there were no significant news or announcements from BWEK. We slightly increased the Target Price to NOK 27/sh, thanks mostly not to estimate changes but the stronger USD versus NOK, while Buy recommendation is reiterated.
Solid results projected to continue
After the solid 1Q21, we anticipate BW Epic Kosan to keep up the good work and report somewhat higher figures QoQ, also noting that this time Lauritzen Kosan’s numbers will be fully consolidated for the whole quarter. We anticipate somewhat reduced margins under the likely record-high revenues figure as the oil price remains elevated, still the double-digit EBIT figure should be seen as a good accomplishment from the company, if reached, in our view.
Stability in the market
BW Epic Kosan releases monthly small gas carrier market assessments in its website and the movement in the rates during the quarter was seen very limited there. In addition, it was noted that four old vessels were moved to scrapping during 2Q21 and five new ones were delivered. Furthermore, an order for three pressurized LPG vessels was placed for a delivery in end-2022 and in 2023 and while this seems insignificant, note that previously there were orders for only seven vessels in total to be delivered during 2022 and 2023 combined. Still, we see BWEK very well positioned in the market with extremely low newbuild orders, especially after the recent joining of forces.
With limited changes to our estimates but stronger USD vs. NOK, we increased the target price for the stock to NOK 27/sh (25). Although the upside has reduced since our last update, it is still significant and thus we reiterate Buy recommendation.
Source: Norne Research