Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• DHT Holdings Inc (NYSE:DHT) maintains a strong balance sheet with low leverage of 17.6% and significant liquidity of $264 million.
• The company achieved a solid financial performance in Q3 2024, with revenues of $92.6 million and EBITDA of $70.4 million.
• DHT Holdings Inc (NYSE:DHT) declared a quarterly cash dividend of $0.22 per share, marking the 59th consecutive quarterly dividend.
• The company has a well-defined capital allocation policy, paying 100% of ordinary net income as dividends.
• DHT Holdings Inc (NYSE:DHT) has not issued equity in the market since 2014, demonstrating financial discipline and shareholder value focus.

Negative Points

• Chinese economic growth and oil demand have not met projections, impacting market expectations.
• The tanker market experienced a soft patch, affecting older vessels more significantly.
• Limited activity in the secondhand ship market, with few modern ships changing hands.
• The geopolitical landscape, including potential changes in US sanctions on Iran, introduces uncertainty.
• The backwardated oil market and inventory levels create challenges for tanker demand dynamics.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Sign with DHT.

Q: What is the current state of the physical sale and purchase market for secondhand ships, and how does it relate to stock price developments? A: Svein Harfjeld, President and CEO, noted that there is limited activity in the market. The last significant transaction was Marinakis selling his fleet to Bahri, pricing a five-year-old ship at around $114-$116 million. There are no modern ships changing hands currently, and few sellers or buyers at those levels. Owners are holding onto assets due to low acquisition costs and a constructive market outlook.

Q: How do inventory levels and market conditions affect the tanker market, and what is the impact of potential changes in market structure? A: Harfjeld explained that OECD inventory levels differ from those in key Asian economies, with Chinese inventories not being very high. A small change in demand could significantly impact the market. OPEC's focus on Asian inventory levels and supply management could lead to a stronger market recovery if current conditions persist.

Q: Is there a plan to modernize the fleet, considering the differentiation in rates for vessels based on age? A: Harfjeld mentioned that older ships suffer more in soft market patches, but they still have potential for good freight opportunities. The company plans to align the delivery of new buildings in 2026 with the aging of older ships, potentially divesting some older vessels to finance new builds or other opportunities.

Q: How do geopolitical factors, such as US sanctions on Iran, affect the tanker market, and is there a risk of the shadow fleet impacting the free market? A: Harfjeld believes that tougher sanctions on Iran would positively impact the market, as the shadow fleet, consisting of ships over 20 years old, lacks the necessary approvals to operate in the compliant market. The potential policy changes under the incoming US administration could lead to a shift in oil transportation dynamics.

Q: How would a peace deal between Russia and Ukraine affect the VLCC market? A: Harfjeld suggested that while the war negatively impacted VLCCs relative to smaller tankers, a peace deal might not immediately change market dynamics. European sentiment towards Russian oil may remain cautious, leading to a gradual reintegration of Russian barrels into the market. However, it could eventually benefit VLCCs as refiners seek cost-efficient transport options.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.