November 11, 2019 [Hellenic Shipping News] – Odfjell posted 3Q19 results this past Tuesday. It was a seasonally weaker quarter for the chemical tankers and the results adjusted for the sale of terminal in Jiangyin fell somewhat short of our projections.

During the quarter the company took delivery of the largest stainless steel chemical tanker ever built and is guiding an improvement in 4Q19. The long term positive expectations towards market development remains and so does our positive stance towards the share under little changes to estimates and unchanged NOK 40/sh Target Price.

Adjusted results a bit behind expectations in a seasonally weaker quarter

Odfjell posted a bit weaker 3Q19 results than we projected. Adjusted for the NOK 14m gain from Jiangyin terminal sale EBITDA came in at USD 45m (USD 48m expected by us). The chemical tanker market was impacted by the seasonally weaker third quarter. Furthermore, a high share of plant turnarounds and the attacks on oil installations in Saudi Arabia were told to have disrupted the feedstock for chemical plants and refineries in September and let to a slower recovery after the summer than normal.

Fleet to be growing next year, contracts renewed with IMO-2020 clauses

Odfjell took delivery of the company’s first super-segregator newbuilding (49,000 dwt) from Hudong during the quarter, which is the largest stainless steel chemical tanker ever built. The second newbuilding is scheduled for delivery in November and the third in February 2020. In total, 7 vessels should be delivered by end-2020. On the IMO-2020 side, the technical operations are progressing according to plan, while the renewed contracts include the bunker adjustment clause in relation to increased prices.

4Q19 guided to show improvement, future development positive

Improved chemical tanker fundamentals and a lower supply of swing tonnage in the market should bring the results up in 4Q19. In the longer term, chemical tanker supply growth of 1.5 % and chemical tanker demand of 5% on average per year through 2021 is projected by the company, which is in line with our positive expectations.

On the terminal side, just as we predicted, Odfjell is considering to sell its terminals in China along with LG. The process is expected to be concluded in the coming quarters. Despite showing stable positive net result, two gas carriers remain in the selling process as well.

Following positive long term markets development expectations and historically profitable Terminal sales that signal likely gains related to terminals in China, we reiterate our Buy recommendation for the stock with little changes to estimates.

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