FRO - Euronav rated new Buy Frontline as Neutral at JPM in upbeat oil tanker view

2023-08-15 12:56:08 ET

Leading oil tanker owners Euronav ( NYSE: EURN ) and Frontline ( NYSE: FRO ) are initiated Tuesday with respective Overweight and Neutral ratings at J.P. Morgan, partly due to greater earnings longevity at Euronav, as well as valuation, although the share prices should be closely correlated.

The tanker space looks upbeat for the near- and mid-term, with a combination of sharply improving profitability and limited new ordering, and the backdrop for the two companies appears supportive for 2-3 years, with both currently on a free cash flow yield of 20%-25%, JPM's Samuel Bland said.

On Euronav ( EURN ), Bland believes the company should benefit from being overweight in the VLCC segment, where there as been almost no new ordering, providing good visibility on demand out to near 2026 but which is not adequately reflected in the stock's current valuation.

Frontline ( FRO ) should see the same beneficial supply/demand dynamics as the rest of the tanker sector, although it is slightly better reflected in the current valuation than at Euronav, which Bland said merits the Neutral rating.

More on Euronav:

• Financial and valuation comparison to sector peers
• Analysis: Euronav: A Strong Oil Transporter Benefiting From Rising Spot Rates
• Stock price return: Up 9% YTD, up 13.5% in the past 12 months

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