HUNT – BUY, TP USD 0.45
We include Hunter in our November portfolio after the company last week confirmed the much-rumoured sale of the ‘Saga’ and the ‘Laga’. The price of USD 168.4m en-bloc implies USD 84.2m per vessel, very much spot on our expectations (and what was rumoured). Delivery is expected to be in December with HUNT saying it intends to ‘propose a distribution of excess capital’, which as far as we understand could mean both repayment of equity (up to USD 200m) and buybacks. Including Q4 cashflow we would peg the HUNT-value at NOK 4.5 if we apply USD 84.2m on the remaining five ships as well. However, of those 5x, four are delivered in 2020 (vs. 2019 for the two that now have been sold) so the value should in fact be closer to NOK 5 in our view. While the company is unlikely to get full pricing of that in the current market, we also highlight that HUNT does have decent coverage on two of those five ships through Q1. All in all, the sales are very positive, and we could see as much as NOK 1/share returned to shareholders after the transaction has been completed. We believe Hunter will have a preference for dividends over buybacks (but that will depend on the share price reaction) – and believe a fair value of NOK 4.5 should be within reach