Odfjell: Solid results from a soft market

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Odfjell posted its 3Q report last week with main figures unchanged QoQ, while we were expecting them to be a bit lower due to softer trading conditions in the chemical tanker market. Details about the sale of Oman terminal and new contracts for super segregators were communicated, however we had them already included in our model and only CapEx annual distribution was affected. The slower 4Q16 guidance for Chemical Tankers leads us to make minor changes to our estimates. Our positive view stays with an unchanged Target Price of NOK 40/sh.

Odfjell managed to keep all the figures at the same level QoQ
Odfjell posted 3Q16 report last Thursday. The main figures came just as in the previous quarter, beating our estimates. The company previously guided chemical tanker business to be weaker in 3Q and we saw rates going down, but Odfjell managed to keep the segment stable. The main driver for this development was said to be an oversupplied CPP (Clean Petroleum Products) market and continued efficiency gains.

CapEx instalments on Oman’s terminal sale communicated
As Odfjell previously announced selling its ownership in a terminal in Oman for around USD 130m (51% goes to Odfjell SE), we valued the sale at an attractive EV/EBITDA level of 12 (comparing to EV/EBITDA of 6.5 for the whole company). Odfjell’s CEO was satisfied as well telling that “The sale of the Oman terminal at an attractive valuation shows some of the underlying value in company’s terminal business”. CapEx instalments were announced and we updated our model accordingly, with the largest portion to be paid in 2019, when the first ship is delivered.

4Q16 guided slower again for Chemical Tankers, but stable Terminals
Odfjell guides a slight reduction in revenues from Chemical Tanker segment in 4Q16 due to a softer market, but stable Terminals is helpful. Following this and having already included Oman’s sale and contracts for new super segregator newbuilds in our model, we made only small estimate adjustments. Undemanding multiples strengthen our positive view and Buy is kept with an unchanged TP of NOK 40/sh.
Source: Norne Research