Teekay Tankers Ltd. 

TNK Details

Teekay Tankers Ltd. (NYSE: TNK) is a global shipping company engaged in the marine transportation of crude oil and refined petroleum products. The tanker segment consists of the operation of all tankers, including those employed on full-service lightering contracts. Its ship-to-ship transfer segment full-service lightering operations and other related services. As of August 01, 2021, its fleet consists of 54 vessels, including three in-chartered vessels, one 50%-owned Very Large Crude Carrier (VLCC) and two ship-to-ship (STS) support vessels.

Fleet Overview (Source: Q2FY21 Earnings Release, August 5, 2021)

Fleet Expansion: In May 2021, TNK repurchased two vessels from its available liquidity for USD 56.7 million, which were previously financed with higher-cost sale-leaseback financing. It is also slated to repurchase six additional vessels for USD 128.8 million under similar sale-leaseback financings through lower-cost sale-leaseback financings, which are expected to complete in the Q3FY21. In addition, the company has in-chartered two Aframax tankers and one LR2 tanker for durations ranging from 18 to 24 months, with the option to extend for another 12 months. Two vessels are anticipated to be delivered in August 2021, with the third vessel arriving in late 2021 or early 2022.

Q2FY21 Results: The company reported a YoY decline of 13.54% in total revenues to USD 123.42 million in Q2FY21 (ended June 30, 2021) compared to USD 142.75 million in Q2FY20. Net loss for the company expanded to USD 129.14 million in Q2FY21 vs. USD 21.37 million in Q2FY20. As of June 30, 2021, the company had cash and cash equivalents of USD 60.50 million and total debt of USD 596.36 million.

Key Risks: In FY20, the spot tanker market accounted for 74.3% of the TNK's total revenue. Therefore, any decline in the spot rate could harm the financials of the company. In addition, TNK operates in the marine transportation industry and faces direct competition from major oil companies and independent tanker companies with higher financial and operational resources at their disposal, which could undermine its business interests.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TNK Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: TNK's stock price decreased 11.89% and 19.02% in the past one and three months, respectively, and is currently leaning towards the lower band of its 52-week range of USD 8.90 to USD 16.09. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 38.87. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 14.17. Considering the company's growth prospects, fleet size and capacity, strong balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 11.41, down 3.31% as of August 12, 2021, at 12:14 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.