HOEGF - Höegh Autoliners: Recent Dip Presents Buying Opportunity

2024-04-01 16:42:10 ET

Summary

• Höegh is experiencing a steep fall in its stock price after an upward trajectory period. The lower price presents an attractive pricing point to new investors.
• While the order book stands at 37 percent, market fundamentals support profitable charter rates.
• The company has revised its dividend policy and will aim to pay out 100 percent of its free cash flow.
• Höegh has ordered twelve new ships that can burn ammonia and methanol, positioning the company for a changing fuel environment. The first ship enters service in Q2.

Investment Thesis

Being long in car carrier stocks was pleasant during 2023, but they have remained roughly flat since the start of 2024. Oslo Stock Exchange-listed Höegh Autoliners ASA ( OTCPK:HOEGF ) has fallen about 30 percent since its peak on February 14, 2024. Valuation calculations (dividend discount model and NAV) indicate that this fall is overblown. Combined with its new, ambitious dividend policy, this solid company offers a strong balance sheet, a newbuild program about to deliver its first efficient ships, and an excellent management track record. Even with a large global order book, projected demand indicates that this capacity will be absorbed.

Company Overview

Höegh Autoliners ASA is a global logistics company in the Ro-Ro space. It operates a fleet of 33 owned and long-term chartered Pure Car and Truck Carriers, ranging from 2,300 to 8,500 car equivalent units (ceu). HOEGF transports about 1.6 million ceu annually....

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