Frontline Shares Jump as DNB Upgrades Tankers to 'buy'

 

DNB Markets: Has upgraded most tanker companies it covers to BUY from HOLD for the first time since April 2016

 

Shipping analyst Nicolay Dyvik says tanker shares are down on average 50 percent since time of downgrade by DNB in 2016, "and we think it's time to buy again"

 

DNB Markets predicts VLCC spot rates set to increase from $22,000 a day in 2018 to $41,000 a day by 2020. This compares to VLCC spot rates below $10,000 in recent weeks

 

On asset values, DNB sees an 11 percent upside to VLCC resale prices by 2019 and 27 percent upside by 2020. DHT, Euronav, Frontline, Gener8 Maritime and Teekay are all upgrade to buy from hold.

 

Share price target in DHT lifted to $5.2 from $4.0, Euronav to $10.7 from $9.0, Frontline NOK 42 from NOK 33 and Gener8 Maritime to $7.4 from $4.9 and Teekay to $1.8 from $1.5.

 

DNB Markets says tanker stocks with moderate leverage have been unchanged year over year which shows that the downside has been taken out.

 

Investors who are bullish on the market should probably buy Frontline as they have high leverage, high upside to asset prices, DNB says, adding that even in a $15,000 a day rate environment, the company will have a cash balance well above $100 million in 2019. Investors who believe the market will turn soon, should buy Frontline, while those who are more sceptical should buy Euronav given its low leverage. Investors who like the combination of high operational leverage, good asset exposure and also modest leverage should buy DHT, the brokerage says.