Four Shipping Companies Upgraded By ING

It looks as though the notoriously cyclical shipping sector is heading back up the mountain, as last week one of the world's prestigious financial firms stamped four companies with an investment ratings uprade.

ING Barings last Wednesday raised its ratings on four shipping companies to strong buy from buy. Analyst Stephen Gengaro raised his ratings on shares of Frontline Ltd., OMI Corp., Overseas Shipping Group and Teekay Shipping.

Frontline was raised to a strong buy from buy and Gengaro's 2000 and 2001 estimates to $1.60 from 40 cents and to $2.35 from $1.00 to reflect the company's "tremendous" leverage to rising time-charter equivalent (TCE) rates for its very large crude carriers (VLCC) tankers.

In addition, he set 12-month price target at $24/share, said his revised rate assumptions for the company for next two years are based on strong tanker fundamentals, and touted Frontline as the world's largest tanker owner, with a high-quality, modern fleet and excellent cost structure.

Gengaro raised rating on shares of international tanker owner OMI Corp. to strong buy from buy, with a price target to $7.50 from $6, and 2000 and 2001 earnings estimates to 45 cents from 25 cents and to 65 cents from 45 cents, respectively. He said his revised estimates reflect upward revisions to his rate assumptions for company's crude tanker and product tanker fleets, and said the company should have sufficient liquidity to meet its cash needs over next six to nine months.

Gengaro raised his rating on shares of Overseas Shipping Group to strong buy from buy and his 2000 and 2001 earnings estimates to 70 cents from 55 cents and to $2.10 from $1.00 respectively. He assigned a $30 price target on stock based on 7.5 times the midpoint of his peak earnings estimate and peak pretax earnings per share estimate, and said he believes company's high-quality modern VLCC and Aframax fleet gives the company "tremendous" leverage to outstanding industry fundamentals he expects to play out over next two to three years.

Also noted in the assessment were the robust rate environment for both VLCCs and Aframaxes, which should drive significant earnings momentum starting in the second quarter, as the primary reason for a Q1 shortfall was the timing of ship fixtures.

Finally, Gengaro raised his rating on shares of Teekay Shipping to strong buy from buy, and set a 12-month price target of $45. He said Teekay is an extremely efficiently-run tanker company as a result of its excellent management team and large, homogenous fleet.