BW LPG Stock: Market-Crushing 18%-Yielder Reported Strong Q1 Results
June 5, 2024
Why BWLP Stock Should Be on Investors’ Radar
The global marine shipping industry has done well so far in 2024, thanks in large part to transit restrictions in the Panama Canal and ongoing challenges in the Red Sea. In particular, liquified petroleum gas (LPG) shippers—including BW LPG Ltd (NYSE:BWLP)—have done exceptionally well.
LPG spot prices have been robust as a result of high U.S. LPG export growth. When BW LPG reported its first-quarter results on May 30, it said the U.S. Energy Information Administration had reported that, year-to-date, average net propane exports from the U.S. increased by 14% year-over-year. (Source: “Financial Results for Q1 2024,” BW LPG Ltd, May 30, 2024.)
The demand for LPG has also gone up. For instance, China’s imports of LPG delivered by very large gas carriers (VLGCs) increased by six percent in the first quarter of 2024, versus the same quarter of 2023.
By the end of May, spot rates reached a high of $60,000 per day. The LPG futures market points to continued strength in spot earnings, trading in the low to mid-$60,000s per day for the remainder of 2024.
That’s good news on every front for BW LPG Ltd.
Admittedly, most North Americans haven’t heard of BW LPG before, but that’s because it only began trading on the New York Stock Exchange (NYSE) on April 29. The company was founded in 1955 and its shares have been trading on the Oslo Stock Exchange (OSE) since 2013, though. (Source: “BW LPG Limited – Commencement of Trading and Admission to Trading on NYSE,” BW LPG Ltd, April 26, 2024.)
BW LPG is a world leader in LPG shipping, with an operating fleet of 43 VLGCs and two medium gas carriers as of April 8. (Source: “Fleet List,” BW LPG Ltd, last accessed May 3, 2024.)
Its VLGCs have a total carrying capacity of more than three million cubic meters (CBM). (Source: “Our VLGC Fleet,” BW LPG Ltd, last accessed May 3, 2024.)
BW LPG controls a total fleet of more than 490 vessels that transport oil, natural gas, and dry commodities. Its 200 liquefied natural gas (LNG) and LPG ships constitute the largest gas shipping fleet in the world. (Source: “Financial Results for Q1 2024,” BW LPG Ltd, op. cit.)
The company is associated with BW Group, a leading global maritime company involved in shipping, floating infrastructure, deepwater oil and gas production, and new sustainable technologies.
High Time Charter Equivalent Income in Q1
For the first quarter ended March 31, BW LPG reported daily time charter equivalent (TCE) income of $61,500 per available day and $59,400 per calendar day. (Source: “Financial Results for Q1 2024,” BW LPG Ltd, op. cit.)
The company also reported a net profit after tax (NPAT) of $150.0 million and free cash flow (FCF) of $468.5 million. Its high net profits were due to strong performances by its shipping and product services business units.
Moreover, BW LPG Ltd reported first-quarter operating profits of $157.8 million and earnings per share (EPS) of $1.07.
During the quarter, the company completed the sale and delivery of a ship, BW Princess, generating $65.0 million in proceeds and a net book gain of $20.0 million.
The company ended the quarter with $661.0 million in liquidity, including $314.0 million in cash. The company has a relatively low debt of $244.0 million. (Source: “Earnings Presentation Q1 2024,” BW LPG Ltd, May 30, 2023.)
Management has said the company’s balance sheet is actually too robust, and that it has been finding it tough to identify places to invest its money in profitable ways. I’m pretty certain they’ll be able to do it eventually.
Looking ahead, BW LPG Ltd’s management said the reduced newbuild delivery schedule for 2024 and 2025 is a positive sign for the near-term supply and demand outlook.
At the start of 2024, the global VLGC fleet consisted of 378 vessels. Since then, 16 VLGCs have been added to the global fleet, bringing the total number to 394. Over the next 18 months, however, the number of newbuild VLGC ships entering service will fall sharply, with just six scheduled for delivery during the remainder of 2024 and 13 scheduled for delivery next year. (Source: “Financial Results for Q1 2024,” BW LPG Ltd, op. cit.)
Management Increased Quarterly Dividend to $1 Per Share
Returning capital to investors through reliable dividends is a big part of BW LPG’s business plan. The company aims for an annual payout ratio of 50% of its NPAT. That ratio could jump to 75%–100% of the company’s NPAT, should certain net leverage ratio targets be met.
Since its initial public offering (IPO) in 2013, BW LPG has paid out more than 71% of its earnings as dividends. In 2023, it paid out 98% of its earnings. (Source: “Why Invest in BW LPG,” BW LPG Ltd, last accessed June 3, 2024.)
Those good times have continued in 2024. At the end of May, the company declared a dividend of $1.00 per share, to be paid on or around June 28. (Source: “Key Information Relating to the Cash Dividend for Q1 2024,” BW LPG Ltd, May 30, 2024.)
As of this writing, this translates to a yield of 18.2%.
The payout represents 93% of the company’s first-quarter total earnings and 106% of the company’s first-quarter earnings from shipping activity. (Source: “Financial Results for Q1 2024,” BW LPG Ltd, op. cit.)
The dividend also represents a 5.2% increase over the $0.95 per share the company paid out in the same period last year.
BW LPG Stock Up 56% in 2024
BWLP stock may have only begun trading in the U.S. in April, but, as mentioned earlier, it’s been trading on the OSE since 2013, so there is a bit of history we can look at.
By every metric, shares of BW LPG Ltd have been outdoing the broader market. As of this writing, BW LPG stock is up by:
- 44% over the last month
- 99% over the last three months
- 56% year-to-date
- 205% year-over-year
Chart courtesy of StockCharts.com
Wall Street analysts aren’t following BW LPG Ltd right now, but chances are good that some analysts will pick up the gauntlet due to the expected growth in LPG exports and imports.
For the period of 2018 through 2025, LPG VLGC exports from North America are projected to expand at a compound annual growth rate (CAGR) of 12%, exports from the Middle East are forecast to grow at a CAGR of three percent, and imports to China are projected to climb at a CAGR of 12%. (Source: “Earnings Presentation Q1 2024,” BW LPG Ltd, op. cit.)
Additional quarters of high earnings should help BWLP stock hit fresh highs.
The Lowdown on BW LPG Ltd
BW LPG might be new to the NYSE, but since the company was founded in 1955, it has proven itself to be one of the best marine shipping companies in its field.
The world’s leading owner and operator of VLGC vessels, BW LPG Ltd kicked off 2024 with solid first-quarter financial results, including high net profits.
This allowed management to announce an above-consensus quarterly dividend of $1.00 per share. The distribution represents almost all of BW LPG Ltd’s total earnings for the quarter and reflects the company’s commitment to returning value to its shareholders.
