RED HOT LPG MARKETS
Dorian LPG Ltd. was the first company in the LPG sector to present their calendar year Q3 figures last Thursday. The average TCE was 47k USD per day and earnings per share was 0.75 USD. On a theoretical annualized basis earnings per share reached 3 USD, meaning that Dorian LPG is currently trading at an annualized P/E ratio of 3.2. Given the recent strength in the freight market, we estimate that calendar Q4 figures could even be better. If we assume TCE rates of USD 65k in Q4, we estimate the EPS to surpass 1.25 USD per share, depending on how much vessels are currently on scrubber retrofits. This would translate into an even lower annualized P/E ratio of 2.6. From an NAV perspective, the estimated 1.25 USD in net profits for Q4 would directly add to their NAV, which means an accretive return of 10% in just one quarter, if we assume that Dorian is currently trading at NAV.
The two other VLGC companies will report their Q3 figures in the next weeks. If they did not do anything unpredictable during the last quarter, we guess that their figures should come in a similar range. The further development of the sector depends now on the question, how long the arbitrage window between the US and Asia remains open. Typically, this window shrinks in the winter season before reopening in Q2. This winter season looks a bit different as propane stocks in the US are quite full, which hinders the US propane price to increase in a meaningful way, yet. So all-in-all we assume that these profitable markets may stay with us at least until next autumn, which could bring a nice profit if we are right in our analysis.
Please remind that our trading strategies "Calima" and "Notos Maritime Strategy Index" are currently overweight in the LPG sector. Both strategies surpassed 35% performance y-o-y last week, outperforming the Dow Jones Global Shipping Index by more than 20%.