BTIG has lifted its price target on DHT Holdings (NYSE:DHT) to $18.00 from $16.00 and maintained a Buy recommendation on the crude oil tanker operator. The brokerage attributed the change to a markedly stronger spot-rate backdrop for tankers so far this year.
According to BTIG, Very Large Crude Carrier - VLCC - spot rates have averaged about $100,000 year-to-date, a level that is nearly double the average for the same period last year. Within that strength, vessels fitted with exhaust-gas cleaning systems - so-called scrubbers - are reported to be earning roughly $10,000 more than non-scrubber-equipped ships.
Product tankers have also contributed to the improved revenue environment. BTIG notes that Medium Range - MR - product tanker spot rates have averaged around $30,000 year-to-date, representing an approximate 50% increase versus the comparable period a year earlier. The firm says this stronger rate regime has helped lift tanker share prices across the sector by roughly 15% to 30% year-to-date.
InvestingPro data cited by BTIG show that International Seaways has been a top performer in the group, delivering a 25.7% price return year-to-date and a 51.5% gain over the past six months.
Looking ahead, BTIG expects that valuation multiples for tanker companies could expand. The firm lists several supporting dynamics: the de-risking of consensus EBITDA estimates, recovering vessel values, rising shareholder distributions, and a favorable supply-demand outlook for the next two years characterized by constrained fleet growth, steady oil demand growth, and continuing geopolitical uncertainty.
In addition to DHT, BTIG reiterated Buy ratings and raised price targets on several peers. The firm moved Scorpio Tankers (NYSE:STNG) to a $80 target, Frontline (NYSE:FRO) to $35, and International Seaways (NYSE:INSW) to $70.
BTIG's comments on International Seaways include several specific data points. The company was noted as trading at $61.02 and nearing InvestingPro's Fair Value estimate. International Seaways is reported to trade at a price-to-earnings ratio of 13.9, to yield 4.8% via its dividend, and to possess a "GREAT" overall financial health score in InvestingPro's assessment. The analysis also cites that two analysts recently revised their earnings estimates for the company upward, and that International Seaways is expected to report results in approximately 22 days. A full Pro Research Report on International Seaways is available through InvestingPro, alongside reports for more than 1,400 other U.S. equities.
Separately, International Seaways has announced the sale or agreements to sell five older vessels, generating roughly $185 million net of commissions and fees. The disposals include three MR tankers with an average age of 18 years and two VLCCs averaging 15 years of age. The company stated that these transactions are aimed at optimizing its fleet by removing older tonnage as part of broader efforts to improve operational efficiency.
BTIG and InvestingPro emphasize that the fleet rationalization and the broader spot-rate strength are material developments for investors tracking tanker operators. The sale of older vessels could change operational capacity and affect financial performance, and market participants are advised to monitor how these asset sales align with each company's strategic objectives.
Key takeaways
- BTIG raised DHT Holdings' price target to $18 from $16 and kept a Buy rating, citing outsized spot-rate gains for tankers this year.
- VLCC spot rates have averaged about $100,000 year-to-date, nearly double last year's pace, while scrubber-equipped vessels earn about $10,000 more.
- MR product tanker rates averaged around $30,000 year-to-date, roughly 50% higher versus last year, helping push tanker stocks up 15% to 30% year-to-date.
Risks and uncertainties
- Geopolitical uncertainty remains an ongoing factor cited by BTIG that could affect tanker markets and investor sentiment.
- Asset sales such as International Seaways' disposal of five older vessels may alter operational capacity and influence near-term financial metrics.
- The positive supply-demand outlook BTIG expects over the next two years depends on limited fleet growth and stable oil demand growth; changes to those assumptions could affect the firm's view on multiple expansion.