[Click eStock] Pan Ocean Accelerates Business Expansion with Investment in 2 LNG Ships... Target Price Up

[Asia Economy Reporter Ji-hwan Park] NH Investment & Securities announced on the 17th that Pan Ocean is showing signs of expanding its business area by deciding to invest 406.7 billion KRW in two 174,000 CBM-class LNG carriers, and raised its investment rating to 'Buy' and its target price by 14.9%, from 4,700 KRW to 5,400 KRW.

Jeong Yeon-seung, a researcher at NH Investment & Securities, explained, "These vessels will be leased to the global oil major Shell for seven years until October 2031 after delivery," adding, "The contract amount is approximately 334 billion KRW." According to Jeong, the contract terms allow for two extensions of three years each at Shell's request, and the estimated daily charter rate is about 59,212 USD, which is slightly higher or similar to the average charter rate over the past five years.

Jeong identified four major implications of this contract. First, Pan Ocean secured an excellent business partner in Shell; second, it expands exposure to the LNG market, which is expected to grow; third, it certifies a stable financial status through a long-term contract with Shell; and fourth, it increases leverage through the expansion of the operating fleet.

He stated, "From a valuation perspective, the expansion of the operating fleet based on a stable financial structure is seen as an effort to increase the net asset value per share."

Jeong added, "In the short term, increased profits are expected due to improved bulk cargo volume next year, and in the mid-to-long term, valuation expansion is anticipated through ROE (Return on Equity) improvement by expanding the operating fleet."

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