DHT Holdings, Inc. 

DHT Details 

A Look at DHT’s 2QFY20 Results: DHT Holdings, Inc. (NASDAQ: DHT) is engaged in operating a fleet of double-hull crude oil tankers on international routes. The company’s modern fleet comprises of three very large crude carriers, two Suezmax tankers and four Aframax tankers.  During the quarter, the company reported shipping revenues of $245.9 million, up from the year-ago quarter’s figure of $106.2 million. Adjusted net revenues for the quarter came in at $202.7 million as compared to $61.2 million reported in the year-ago period. Adjusted EBITDA for 2QFY20 came in at $178 million, up from $38 million reported in 2QFY19. Net income for the quarter came in at $135.8 million or $0.92 per share as compared to a net loss of $10.5 million or -$0.07 per share reported in the year-ago period. General & administrative expenses during the quarter came in at $5 million, up from $4 million reported in 2QFY19. Voyage expenses for 2QFY20 came in at $43.2 million, down from $45.0 million reported in the year-ago quarter. For the quarter, the company has paid a cash dividend of 48 cents per share, depicting the company’s 42^nd consecutive quarterly dividend.

Key Highlights (Source: Company Reports)

Balance Sheet Highlights: The company exited the quarter with a total cash balance of $137.7 million, with net debt amounting to $581.5 million. Net cash flow operations for the quarter came in at $186.6 million, up from cash inflow of $47.6 million in the year-ago period. Net cash used in investing activities for the quarter stood at $9.7 million, whereas net cash used in financing activities came in at $115 million.

Key Developments: The company entered into a two-year time-charter agreement in June 2020, with an option to extend at $41,800 per day. Further, in 2QFY20, the company prepaid $59.2 million under the ABN Amro Credit Facility and the Nordea Credit Facility. The voluntary advances were made for all regular installments for 2021. Further, the dividend is a good way of returning cash to investors while at the same time providing a boost to the bottom-line.

Key Risks: Coronavirus-generated delays in discharging cargoes at ports following the decreased consumption of refined oil products are likely to weigh on the company’s performance in the days ahead. Further, any increase in expenditure total, mainly owing to accrual for social security tax, might weigh on bottom-line growth. Also, the virus outbreak has impacted global consumption of refined oil products imposing a build-up of shore-based inventories of both feedstock and end products, resulting in bottlenecks and delays to discharge cargoes in ports.

Valuation Methodology: P/CF Multiple Based Relative Valuation (Illustrative)

 P/CF Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of DHT closed at $5.25 with a market capitalization of ~$896.7 million. The stock made a 52-week low and high of $4.77 and $8.83 and is currently trading below the average of its 52-week trading range. The stock gave negative returns of ~8.69% and ~7.89% in the last one year and one month, respectively. Considering the above factors, we have valued the stock using P/CF multiple based relative valuation and arrived at a target price of an upside of lower double-digit (in % terms). For the purpose, we have taken peers like Scorpio Tankers Inc (NYSE: STNG), Ardmore Shipping Corp (NYSE: ASC), International Seaways Inc (NYSE: INSW), to name few. Hence, we recommend a “Speculative Buy” rating on the stock at the closing price of $5.25, up 0.96% on 4 September 2020.

DHT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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