Wall Street Gets Constructive On Gener8 Maritime; Here's What Analysts Think

Gener8 Maritime Inc GNRT went public less than two months ago, on June 25. The company expected to price its IPO in $17-$19 range, but instead went off at $14, reflecting some bearishness in the market. Now, the silent period is over and Wall Street research firms are starting to weigh in; and they seem to be more constructive!

At least four major research firms initiated coverage on the stock on Monday. They all gave it a Buy rating, although price targets differed. UBS gave it a $21.00 price target; Citigroup, an $18.00 price target; Evercore Partners, a $19.00 price target; and Jefferies, a $20.00 price target. This article, however, will look into the color provided by Citi and UBS.

UBS

UBS analysts Spiro M. Dounis and Chintan Desai select Gener8 Maritime as a Top Pick. They believe the company offers “pure-play crude tanker exposure and fully-funded built-in growth from 21 VLCC newbuildings,” and see nearly 50 percent upside potential for the stock, mostly derived from a 20 percent increase in VLCC value.

The experts note that the company’s “fully-funded newbuilding program will more than double the size of its on-the-water fleet” and allow it to considerably increase its EBITDA. Moreover, they believe its participation in Navig8’s market-leading commercial pools will allow it to benefit from economies of scale and thus, drive outperformance.

Citigroup

In a report issued Monday, Citi analyst Christian Wetherbee and his team also provide some color on Gener8. The experts believe the stock is mispriced, as the market continues to get arguably punitive on VLCC values. As a result, the firm sees plenty of upside for the stock “as the company executes on its fully financed pipeline of newbuilding eco-VLCCs,” and thus remains “constructive on tanker rates, supported by sustained crude production rates and longer hauls.”

The analysts remark that fleet growth and M&A activity provide important growth catalysts, and that valuation looks attractive on several metrics (most importantly, on cash flow).