Dorian LPG: Massive Discount To NAV And Double-Digit Yield; Rating Upgrade

seekingalpha11-21 11:43

The day rate weakness continues in the second quarter of the fiscal year. In 2Q25, Dorian reported $82.4 million in revenue, compared to $144.6 million in 2Q24.On November 5, Dorian declared $349 ...

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In 2Q25, Dorian reported $82.4 million in revenue, compared to $144.6 million in 2Q24.On November 5, Dorian declared $349 ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739184-dorian-lpg-massive-discount-to-nav-and-double-digit-yield-rating-upgrade\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Dorian LPG: Massive Discount To NAV And Double-Digit Yield; Rating Upgrade</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nDorian LPG: Massive Discount To NAV And Double-Digit Yield; Rating Upgrade\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-21 11:43 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4739184-dorian-lpg-massive-discount-to-nav-and-double-digit-yield-rating-upgrade><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The day rate weakness continues in the second quarter of the fiscal year. In 2Q25, Dorian reported $82.4 million in revenue, compared to $144.6 million in 2Q24.On November 5, Dorian declared $349 ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739184-dorian-lpg-massive-discount-to-nav-and-double-digit-yield-rating-upgrade\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LPG","symbol_name":"Dorian LPG","start_time":0,"source_url":"https://seekingalpha.com/article/4739184-dorian-lpg-massive-discount-to-nav-and-double-digit-yield-rating-upgrade","article_id":"2485484542","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1317779408/image_1317779408.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485484542","pubTimestamp":1732160592,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"The day rate weakness continues in the second quarter of the fiscal year. In 2Q25, Dorian reported $82.4 million in revenue, compared to $144.6 million in 2Q24.On November 5, Dorian declared $349 mill","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":["rate"],"viewcount":null,"language":"en","relate_stocks":{"LPG":"Dorian LPG"},"translate_title":"Dorian LPG：资产净值大幅折扣和两位数收益率；评级升级","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"LPG":0.9},"content_text":"The day rate weakness continues in the second quarter of the fiscal year. In 2Q25, Dorian reported $82.4 million in revenue, compared to $144.6 million in 2Q24.On November 5, Dorian declared $349 million in cash, $142 million in long-term leases, and $525 million in long-term debt.Dorian's fleet has higher daily OPEX and breakeven costs compared to peers, but scrubber savings and ammonia upgrades offer potential benefits.Dorian offers an attractive discount to NAV as a margin of safety. Additionally, the double-digit yield serves as the reasonable risk premium. I upgraded Dorian’s rating from Hold to Buy.   alvarez Note: I previously covered Dorian LPG (NYSE:LPG) in September. I pointed out Dorian's strengths: large fleet, healthy balance sheet, and double-digit yield. In my note, I discussed VLGC market dynamics, which are less attractive than small/handy vessels. Another red flag was the share issuance in July. It increased the number of outstanding shares by 5%. Then, LPG trades at 90% PNAV. I gave the company a Hold rating because of the share dilution and VLGC's ample supply. In today’s note, I review 2Q25 results. VLGC market and company’s rating. Introduction Since my last note on Dorian, LPG shipping stocks have dropped further. Except for Navigator Holdings (NVGS), all erased their YTD gains. The pullback moved LPG stocks into the discount zone. Dorian trades at 64% PNAV. The company’s yield increased to 15.26%. The 2Q25 results were unsurprisingly disappointing. Dorian's revenue declined 42%, and EPS fell 88%. Seasonality played a significant role in the decreasing profitability. On the positive side, LPG is a well-capitalized and solvent enterprise. Fleet Dorian has a large fleet of VLGC (very large gas carriers). It runs 21 owned vessels and four chartered-in. 16 of the company ships are equipped with scrubbers. Helios Pool operates the company’s fleet. Dorian reported $37,010/day TCE, $10,114/day daily OPEX, and $26,000/day break even. Compared to the other two large VLGC owners, Avance Gas (OTCPK:AVACF) and BW LPG (BWLP), Dorian’s breakeven is higher.  Avance Gas: $39,744/day TCE, $8,200/day daily OPEX, $20,000/day breakeven BW LPG: $43,009/day TCE, $8,600/day daily OPEX, $22,300/day breakeven  BW and Avance have not issued their 3Q24 reports. The TCE figures I used are from their guidelines for the third quarter. Daily OPEX and breakeven are the average value for the first six months 2024. Another negative is the higher daily OPEX than BWLP and AVACF. Avance's fleet is younger, so a lower daily OPEX is expected. BWLP’s fleet is older than Dorian’s. However, BW reported daily OPEX below $9,000/day. In 2024, the company completed three dry docks. Until the end of the fiscal year, Dorian planned another three vessels for drydock. YTD dock expenses are $5 million. The projection is for drydocking total expenditures to reach $8 million by the end of the fiscal year. Most of Dorian's vessels were built in 2015. The following calendar year will be busy with the second five-year special survey cycle. The LPG fleet has 76% of its vessels equipped with scrubbers. For reference, BW LPG and Avance score similar scrubber penetration figures, 67% and 83%, respectively. For the latest quarter, the net scrubber savings were $1,962/day. Given the higher daily OPEX and breakeven, scrubber savings could be the difference between life and death for the company. Dorian reported that it upgraded one of its vessels to ammonia cargo capacity. One more vessel is scheduled for an ammonia upgrade until the end of the calendar year. After the upgrade, Dorian will have three VLAC tankers (very large ammonia carriers). Dorian contracted a new VLAC with 93,000 cbm capacity in November with Hanwha Ocean. The delivery is scheduled for 2Q26. The global ammonia market is anticipated to grow at a 6.3% CAGR between 2024 and 2034. Converting some of the ships to ammonia carriers is well-timed. I expect the demand for VLAC to grow significantly in the coming years. 2Q25 results The day rate weakness continues in the second quarter of the fiscal year. In 2Q25, Dorian reported $82.4 million in revenue compared to $144.6 million in 2Q24. LPG 2Q25 report Voyage and operating expenses decreased YoY. Nevertheless, the decline could not offset the revenue contraction. In 2Q25, Dorian declared a $19.1 million operating income, 76% lower than that of 2Q24. The net income 2Q25 is $9.4 million, resulting in $0.22 EPS. Since June, Dorian has not issued more shares. Then, the company sold 2 million new shares for $44.5, increasing the number of outstanding shares by 5%. This was an unnecessary dilution, considering Dorian’s robust balance sheet and lack of expansion plans. In 2Q25, Dorian repurchased common shares for $4.3 million. I am looking for more share buybacks. Especially at the 36% discount to NAV, buybacks are a no-brainer. Dorian is one of the dividend kings in the LPG segment. On November 05, Dorian announced a $1.00/share special dividend for 2Q25. At the present stock price, the yield is 15.5%, and the payout ratio is 68%. On November 5, Dorian declared $349 million in cash, $142 million in long-term leases, and $525 million in long-term debt. Total Debt to Equity is 69%. For 2Q25, Dorian reported $13.3 million in gross interest expenses. The company realized $57.4 operating cash flow for the same period and $19.1 million operating income. Valuation  All LPG shipowners trade at attractive discount to NAV. From the big tree VLGC owners, Dorian is the cheapest, as measured by PNAV. Inputs for the NAV equation are:  Fleet replacement value: $2,020 million Advances for vessels under construction: $24.6 million Current assets: $439 million Total Liabilities: $773 million Total Debt: $754 million Market Cap: $1,100 million Total Outstanding Shares: 42.8 million NAV/share: $39.8  LPG trades at 64% PNAV and 37% gross LTV. For comparison, Avance trades at 80% PNAV and BW LP at 83%, respectively. Considering EV multiples, BW LPG is the cheapest in the group. KoyfinAvance has the fleet with the most attractive specifications (age profile and scrubber penetration). The company also pays massive dividends and repurchases shares. BW, on the other hand, comes with a fleet and dividend yield like Dorian's. However, it scores the higher FCF yield. That said, all VLGC operators are attractive at that valuation. VLGC market  From the LPG shipping segment, VLGC’s fundamentals are the most unfavorable. The number of new orders exceeds the percentage of aging ships. In that case, demand growth must exceed fleet growth for a few years to maintain sustainable day rates. A short-lived perturbation in LPG demand may shift the market from deficit to excess. The following chart for Navigator Holdings shows the order book and age profile for various LPG ships. NVGS 3Q24 presentationThe VLGC order book is 38%, while the percentage of ships older than 20 years is 14%. Ammonia freight demand will act as a cushion to a certain degree. Below is a quote from Drewry on ammonia impact: While over 200+ projects for clean ammonia are in the planning stages, the development has been slow. Meanwhile, the uptake of clean ammonia in the existing import markets will require subsidies and incentives. Therefore, we expect the clean ammonia trade to reach 8-10 million tonnes by 2029. Despite the early impediments, the future looks bright for this trade, fuelling orders, especially for the larger vessels – VLACs.  Nevertheless, short-term demand fluctuations would adversely impact the day rates. LPG demand is projected to grow in the coming years. The US cemented its position as a leading LPG exporter. With a new administration on the horizon, domestic energy projects and exports will become a priority. So, US dominance in LPG exports will continue. On the other hand, demand is driven by the East. India and China are the prime consumers of LPG and NGL. In summary, the demand for LPG freight for tonne miles is intact and, for now, exceeds the fleet growth. Risks  The prime risk for VLGC owners is the enormous order book. Dorian is taking steps to move into ammonia freight, reducing the downside risk to some degree. Dorian keeps its books in check. The company has ample liquidity and adequate capital structure. Another round of share dilution is a risk to consider. The last one in June was unexpected and, in my opinion, unnecessary. The discount to NAV acts as a margin for safety. Plus, double-digit yields serve as reasonable compensation for the risk taken. Final Thoughts  Dorian is a shipping stock for dividend investors. The recent pullback made LPG attractive again. The company trades at 64% PNAV and offers a 15.2% yield. The risk of weaker day rates is always here. However, the discount to NAV and the appealing yields are sufficient compensation. That said, I upgraded Dorian’s rating from Hold to Buy.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485484542"}