Double Hull (DHT) Shares Rise on Upgrade

Shares of Double Hull Tankers Rise After Analyst Suggests Stock Is Undervalued
January 18th, 2007

NEW YORK (AP) -- Shares of Double Hull Tankers Inc., which owns and operates a fleet of crude oil tankers, soared Friday after a Citi analyst raised the stock to "Buy," citing its improved value following steep sell off.

Analyst John Kartsonas said that despite his negative expectations for the tanker market in the next several years, Double Hull's current share value provides a buying opportunity for investors.

He noted that the company's recent implementation of a fixed quarterly dividend provides steady benefits for investors as well, despite some investors frowning over the new 25 cent-per-share dividend as a cut from previous quarters.

Quarterly dividends ranged between 37 cents a share and 44 cents a share in 2007.

"Management's decision to reduce the dividend might have upset some investors, but the reality is that longer term it should prove to be a wise decision -- a company cannot pay dividends that are well above earnings and rely purely on the equity markets for growth," Kartsonas said in a note to clients. "Given the importance of dividends in the shipping world, we believe investors will continue to view Double Hull as a dividend provider but this time with the additional benefit of growth."

He raised his estimates for 2008, citing stronger-than-expected first-quarter vessel rates and newly-acquired carriers.

However, lowered his 12-month price target to $12 from $14, saying he expects higher costs in 2008. He also lowered his 2009 estimates on lower expected vessel rates.

Shares of Double Hull rose 90 cents, or 9.5 percent, to $10.40 Friday. The stock has ranged between $9.32 and $18.79 in the past 12 months.

Frontline and Friends on Fire

Frontline and Friends on Fire
by Toby Shute
July 10, 2007 (Motley Fool)

Thursday's spike in Frontline (FRO) shares reminded me that I hadn't looked at any of the crude oil shippers in a while. After a little digging, I turned up a few potential explanations for the pop, one of which can be safely ignored -- and one that can't.

Around the time I reviewed the first-quarter results of Nordic American Tanker (NAT), overcapacity started weakening freight rates for crude carriers. One explanation pegs the capacity glut on slowed import demand from China, which was busily executing refinery turnarounds. This maintenance work's seasonal, routine nature makes me think that spot rates' pre-summer softening shouldn't have surprised anyone. Sure enough, these companies' stocks have shown no significant weakness. Tiny Top Tankers (TOPT), for one, has seen shares surge since mid-May.

Not everyone is celebrating the group's buoyancy. Citigroup analyst John Kartsonas noted in early June "that currently there is limited value in any of the tanker stocks we cover, as valuations have reached unsustainable levels."

If that's the case, why has Frontline, the bellwether of the group, ramped higher in the past week?

Ignore the recently resurfaced buyout rumors involving ExxonMobil. Frontline is Norwegian billionaire John Fredriksen's golden goose, and he's not likely to take a gander at any takeover offer.

Any theoretical buyout premium is a pittance compared to the massive cash flows this world-leading tanker operation consistently pumps out.

Instead, concern yourself with the supply and demand outlook for tankers and crude oil. The two factors are related, but have their own individual dynamics. Tanker oversupply seems to be kept in check right now by both the phasing out of single-hulled units, and the usage of some units to store oil rather than deliver it. With oil futures in contango - i.e., pointing higher in future months -- it becomes economic to sit on the oil for a while.

As far as the crude oil market goes, increases in supply and demand alike are a recipe for higher freight rates. Futures contracts on the benchmark supertanker route are pointing higher -- roughly double their present level, according to Imarex. This outlook seems to be supporting Frontline, Overseas Shipholding Group (OSG), and Tsakos Energy Navigation (TNP), even as they float near 52-week highs.

http://www.fool.com/investing/general/2007/07/10/frontline-and-friends-on-fire.aspx