LNG Shipping Equity Index down 7.5% this year says Drewry

The Drewry LNG Shipping Equity Index declined 7.5% YTD (as of 16 November 2023), underperforming the S&P 500, which surged 17.4% during the same period. The share prices of Nakilat fell 7.4%, Flex LNG 5.4% and Golar LNG 4.6% YTD, while in the last one month alone, Golar LNG’s stock price crashed 9.7%, Nakilat 6.7%, but that of Flex LNG was almost flat. LNG shipping stocks were affected by relatively softer LNG shipping spot rates this winter and lacklustre spot demand.In 2Q23, Nakilat’s total revenues grew 5.8% YoY to USD 319.7mn (QAR 1,183.9mn) and net income rose 2.4% YoY to USD 112.1 mn (QAR 415.1mn). While the results benefited from higher joint venture income, increased operating costs and financial expenses dragged the company’s net income. Flex LNG revenues increased 3.6% YoY to USD 94.6mn, while net income declined 3.2% YoY to USD 45.1mn. Higher interest expenses weighed on the company’s net income.

Capital Product Partners (CPP) has entered into an agreement with Capital Maritime to acquire 11 LNG vessels for USD 3.1bn. Except for one, all other vessels are under construction and will be delivered between January 2024 and March 2027. The company also plans to divest its container shipping fleet of 15 vessels gradually and rename itself Capital New Energy Carriers by this year’s end, changing its structure from a partnership to a corporation in the process. The company has an existing fleet of seven LNG vessels. In our view, this move points towards the long-term attractiveness of LNG shipping and would give more options to equity investors interested in listed LNG shipping players.

LPG stocks under our coverage saw their prices increase in 2023 YTD (as of 16 Nov 2023) due to high freight rates, increased second-hand prices and strong financial results thus far this year. Stock prices of Stealth Gas, BW LPG and Navigator Holdings surged 98.9%, 93.3% and 17.7%, respectively. In the last one month, BW LPG stock has surged more due to its higher exposure to the VLGC spot market.

The stock price of BW LPG has benefited from strengthening spot freight rates for VLGC vessels. The company plans to complete its dual listing in the US by 2Q24, which will aid in increasing its shareholder base and liquidity. The surge in StealthGas share price can be attributed to its plan to enter bigger LPG vessels, and ongoing deleveraging and share buyback programmes.

BW LPG reported robust 3Q23 results, with shipping revenues up 49% YoY to USD 30.87mn and net profit up 163.6% YoY to USD 122.3mn. TCE rates increased 65.2% YoY to USD 63,100pd. The revenue of Navigator Holdings grew 29% YoY to USD 137.8mn and adjusted EBITDA jumped 74.2% YoY to USD 72.2mn. TCE rates increased 19.3% YoY to USD 26,278 pd. Navigator Holdings is working with its JV partner to increase the capacity of its ethylene export terminal from 1.0mn tonnes per year to 1.6mn tonnes per year. The expansion is expected to be completed by 4Q24.

LPG shipping rates have been robust in 2023 YTD, bolstered by growing US LPG exports to Asia, increased Panama Canal waiting time, widening arbitrage and ongoing geopolitical tensions.

Source: Drewry Maritime Financial Research