Valuation of Ocean Yield ASA : A fundamental analysis and valuation of Ocean Yield ASA

Abstract

This thesis aims to value the equity of Ocean Yield ASA. With a bottom-up approach, each vessel in the fleet is valued based on the contracted backlog of charter hire and the expected sales price from purchase obligations and exercised purchase options, or the expected residual value at redelivery of the vessel. The cost of capital is determined by computing a beta coefficient for each vessel type using the MSCI World Index as benchmark index. The current fleet is valued at NOK34.4 per share. A growth component is added to reflect the opportunities emerging from unsustainably low vessel orderbooks. Segments highlighted as particularly interesting for fleet growth are containerships and dry bulkers. The current strong freight rates in both segments should increase newbuild orders going forward. Containerships is the preferred segment due to the solid counterparties. The value of growth and value accretive reinvestments to maintain the fleet size is estimated to NOK5.7 per share. The thesis concludes with a fair equity value of NOK40.1 per share. Vessels that are unemployed, namely the FPSO Dhirubhai-1 and the two AHTS vessels Far Senator and Far Statesman, are valued at the expected scrap price and at the level of the outstanding debt facility, respectively. The upside to valuation of these three assets in the event of firm long-term employment, and a fleet growth beyond the assumed fleet run-rate of 80 vessels, implies upside to the NOK40.1 fair value estimate.