Hafnia Ltd Stock: 126% Upside Potential with Undervalued 27%-Yielder?
March 21, 2025
Outlook for Hafnia Ltd Remains Bullish
The outlook for crude oil has turned bullish as tensions in the Red Sea intensify following the recent U.S. air strikes against Houthi rebels in Yemen, an Iran-backed group that has targeted shipping lanes in the Red Sea since late 2023.
This wasn’t a one-time strike either. In a post on Truth Social, President Donald Trump said he would deploy “overwhelming lethal force until we have achieved our objective.” (Source: @realDonald Trump, Truth Social, March 16, 2025.)
The Houthis have been launching attacks against commercial vessels in the Red Sea since 2023, effectively choking off shipping in the Red Sea and Suez Canal, two vital trade routes for oil and gas between Asia, Europe, and North America.
Tensions in the Red Sea have led to unrest and caused shipping costs to soar as oil and gas vessels are forced to take significantly longer routes around South Africa. This uncertainty should result in continued strong time charter rates for marine shipping companies like Hafnia Ltd (NYSE:HAFN).
Operating a fleet of over 200 vessels, Singapore-based Hafnia Ltd is the largest operator of product and chemical tankers in the world. (Source: “About,” Hafnia Ltd, last accessed March 17, 2025.)
The majority of the company’s vessels operate in the spot market, primarily through pools of similarly sized vessels, allowing Hafnia to maximize fleet utilization and revenues and cyclical freight rate recoveries.
The company transports vegetable oil, easy chemicals, and clean and dirty, refined oil products to chemical, oil, trading, and utility companies.
If you’re not familiar with Hafnia Ltd stock, you’re not alone; it has only been trading on the New York Stock Exchange (NYSE) since April 2024. However, Hafnia has been trading on the Oslo Stock Exchange (OSE) since November 2020.
Solid Q4 & 2024 Results
After Hafnia reported its best nine-month performance ever, management noted that the product tanker marketed had softened in the fourth quarter on sector cannibalization and shorter voyages. (Source: “Q4 2024 Investor Presentation,” Hafnia Ltd, November 27, 2024.)
That said, the company was able to deliver a fourth-quarter net profit of $79.6 million, or $0.16 per share, and full-year net profit of $774.0 million, representing another year where it performed really well.
Hafnia’s time charter equivalent (TCE) earnings for the fourth quarter were $233.6 million, up slightly from $329.8 million in the same prior-year period, resulting in an average TCE of $22,692 per day.
For the full year, TCE earnings were up slightly at $1.39 billion, resulting in an average TCE of $33,000 per day.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $131.2 million.
As of February 13, 67% of first-quarter earning days were covered at an average of $23,989 per day, and 25% will be covered at $24,062 per day for 2025.
Commenting on the solid financial results, Mikael Skov, the company’s chief executive officer, said, “While the market dynamics shifted in the fourth quarter, Hafnia demonstrated resilience in navigating the market, delivering a net profit of $79.6 million in Q4 2024. This brings our full-year net profit to $774.0 million, marking another year of strong performance.”
First-Quarter Dividend of $0.29/Share Declared
On the dividend front, Hafnia raised its dividend payout ratio (the percentage of earnings paid to shareholders as dividends) from 70% to 80%, while its net loan-to-value (LTV) is between 20% and 30%. When the net loan-to-value falls below 20%, the company will raise the dividend payout ratio to 90%.
At the end of the fourth quarter, Hafnia’s net LTV ratio was 23.2%, increasing from the third quarter mainly due to a decline in the market value of its vessels. Given that, the company announced a payout ratio of 80% for the quarter, including $49.1 million utilized in share buybacks in December.
As a result, Hafnia Ltd stock distributed a total of $14.6 million for a quarterly dividend of $0.0294 per share, or $1.16 per share on an annual basis, for a current forward yield of 27.05%. (Source: “Dividend History,” Hafnia Ltd, last accessed March 17, 2025.)
Hafnia Ltd Stock Expected to Hit Record Highs
For the most part, Hafnia Ltd stock had been doing well since its dual listing on the NYSE. This includes hitting an all-time record high of $8.99 per share on May 31, 2024. Hafnia Ltd stock traded lower in the back half of the year and took a hit after the company reported its fourth-quarter results.
Despite Hafnia reporting solid fourth-quarter and full-year numbers, HAFN stock took a hit in February. This was most likely because the company’s LTV rate was above 20%, which resulted in a big reduction to its quarterly dividend.
While Hafnia Ltd stock is down 20% year to date and 29% on an annual basis, Wall Street isn’t fazed by the setback. Analysts have provided a 12-month share price target range of $6.50 to $10.00. This points to potential gains of 47% to 126% with Hafnia Ltd stock. The median price target of $10.00 would put HAFN in record territory.
Chart courtesy of StockCharts.com
The Lowdown on Hafnia Ltd Stock
Hafnia Ltd is a marine shipping stock with the largest fleet of product and chemical tankers. It reported solid fourth-quarter and full-year results and its first-quarter TCE rates were higher than what they were in the fourth quarter. Ongoing tensions in the Red Sea could see the company’s TCE rates climb even higher over the near term.
The strong outlook for Hafnia Ltd stock and its reliable dividend continues to be great news for common shareholders, especially the 206 institutions that hold 30.68% of Hafnia shares. (Source: “Hafnia Limited (HAFN),” Yahoo! Finance, last accessed March 17, 2025.)
Some of the biggest institutional holders are Acadian Asset Management, The Vanguard Group, Barclays PLC, and JPMorgan Chase & Co. An even larger 43.88% of shares is held by insiders. This high insider interest could entice Hafnia to deliver stronger results.
