Frontline (FRO) Ramps Despite Overseas Shipholding (OSG) BK, Analysts Notes VLCC Spot Rates Rallying

November 14, 2012 10:19 AM EST
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Price: $7.15 +0.28%

Rating Summary:
    3 Buy, 10 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 18 | Down: 17 | New: 10
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Shares of shipper Frontline Ltd. (NYSE: FRO) are surging Wednesday despite negative news in the sector with the bankruptcy of Overseas Shipholding (NYSE: OSG). The upside appears related to comments from analysts at Dahlman Rose on rallying VLCC spot rates.

The firm notes that strong fixture activity in the Arabian Gulf has pushed TCE earnings for Asia-bound cargoes to ~$25,000/day. This compares to averages of just $5,000/day since July and first-half 2012 averages of $32,500/day. st Africa VLCCs are also pushing higher, with a significant bump in China-bound activity. Over the past three days, the West Arica / China route has jumped from $15,000/day to $25,000/day, the firm notes.

"Frontline (FRO) and Overseas Shipholding (OSG) have the most exposure to spot VLCCs and are in line to benefit from these improving rates," analyst Omar M. Nokta notes. "Considering OSG filed for Chapter 11 bankruptcy this morning, we suggest investors look to invest in FRO, especially since it is in a good financial position after its restructuring last."

Dahlman Rose maintained a Buy rating and price target of $5.00 on FRO.

For an analyst ratings summary and ratings history on Frontline Ltd. click here. For more ratings news on Frontline Ltd. click here.

Shares of Frontline Ltd. last traded at $3.62, up 12.3 percent.

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