FBR Capital Upgrades Tankers Industy to Overweight (FRO, OSG, GMR, NAT)

November 13, 2009 7:17 AM EST

FBR Capital upgrades the tankers industy to Overweight, citing epectations for marked improvement in the supply/demand balance in 2010. Frontline Ltd. (NYSE: FRO) is their top indea in the tanker space and they upgraded the stock to Outperform and raised their price target to $33.

The firm commented, "We forecast excess supply decreasing from 7.7% in 2009 to 3.8% in 2010 to near zero in 2011. One of the factors supporting the supply/demand improvement is that more than 40% of new orders will be offset by single-hull scrapping. Additionally, the secular trend of increased seaborne demand should support accelerated ton-mile expansion in this up-cycle. Based on this model, we are forecasting very large crude carrier (VLCC) day rates to increase from $29,000 in 2009 to $33,000 in 2010 and $37,000 in 2011. Furthermore, we believe that OECD inventories are not as relevant as some think because OECD demand is declining as a percentage of global oil demand."

Overseas Shipholding Group (NYSE: OSG) and General Maritime Corp. (NYSE: GMR) remain Outperform rated. The firm maintains their $45 target on OSG and $9 target on GMR.

The firm raised their price target on Nordic American Tanker Shipping Limited (NYSE: NAT) to $34 from $30 based on a 10% dividend and are maintaining a Market Perform rating.

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