JPM cuts Euronav to 'neutral' on deal to sell oil tankers to Frontline

Frontline

31/10/2023 10:51

** J.P.Morgan cuts rating on Euronav  EUAV.BR  to "neutral"
from "overweight", as the broker factors in the oil tanker
firm's planned merger deal with shareholders which will see it
sell part of its fleet to Frontline  FRO.OL 
    ** Shareholder CMB is poised to buy Frontline's 26.12% stake
in Euronav for $18.43 per share, while Frontline will buy 24
VLCC tankers from Euronav for $2.35 billion
    ** The deal is "highly likely to proceed, with seemingly low
risks from anti-trust, EGM vote and from either party walking
away. As a result, we have chosen to reflect this in our
forecasts and target prices" - JPM​ 
    ** Given the deal will see Euronav cut its tanker fleet, the
brokerage cuts forecasts for co by around 30% from FY24 onwards,
and slashes ‍TP to the $18.43 offer price, from $21
    ** For Frontline  FRO.OL , the brokerage raises forecasts by
roughly 40% from 2024, since the deal will expand its tanker
fleet 
    ** For the sector in general, JPM expects "a multi-year
period of strong profitability,"​
    ** "Rates have increased materially in recent weeks, which
we expect is partly due to seasonality and also partly due to
geopolitical tensions in Middle East," - JPM 
    ** Euronav shares edge down 0.5%, while Frontline rises
about 1.5%​

    

 (Reporting by Olivier Sorgho)
 ((Olivier.Sorgho@thomsonreuters.com))