Analysts believe the timing is right for investors to add tanker company exposure after recent share sell-offs.
Clarksons Securities noted a “tough week” for shipping stocks, with the average of more than 60 publicly traded owners falling 3%.
Crude and product tankers, LPG ships and car carriers suffered losses of up to 7%.
In contrast, dry bulk and container line equities continued their upward trend.
Clarksons Securities said the broader stock market remains volatile, driven by geopolitical uncertainty and policies linked to US President Donald Trump.
“Several shipping companies reported fourth-quarter earnings last week, and the stock market punished those who failed to meet dividend expectations,” analysts led by Frode Morkedal added.
“While cautious investor sentiment is understandable, it also presents potential buying opportunities, particularly for tanker stocks.”
They argue that shipping investors continue to prioritise dividends as a key factor in managing cyclical risks and geopolitical uncertainties: “As a result, companies that fail to meet dividend expectations face market backlash.”
The analysts cited BW Group product tanker company Hafnia, which dropped 14% after declaring a dividend of $0.03 per share, well below the consensus estimate of $0.09.
The lower payout was primarily due to increased stock buybacks, which reduced cash dividends, as well as a higher loan-to-value ratio, which cut the dividend ratio from 90% to 80% of net profits, Morkedal and his team explained.
“Hafnia justified its decision by emphasising the long-term benefits of repurchasing stock at 70% of net asset value, a move we agree with,” they said.
“Reducing the share count enhances NAV per share and lifts earnings per share, all else being equal.”
Clarksons Securities estimates Hafnia is trading at 61% of NAV, meaning the market is pricing in a 31% decline in ship values.
This implies a $35m valuation for a prompt resale MR, despite broker quotes at $51m.
The investment bank believes tanker stocks are now priced attractively, as investors could see upside potential as long as Hafnia’s MR rates exceed $19,000 per day over time. Spot rates in the Pacific are currently $21,700 per day.
Fearnley Securities is estimating a dividend yield for Hafnia at just below 10% for 2025.
“With normalised freight rates and a limited outlook for positive catalysts (ie, demand growth exceeding supply growth) for the year, we believe freight [rates] will continue to move according to their normal seasonal pattern going forward, receiving some support through trickle-economics from the crude segment,” analysts Fredrik Dybwad and Nils Thommesen said.
They view the equity as cheap on an NAV basis, but added that investors have “generally switched to considering earnings and dividend yields to a larger extent than before”.(Copyright)
