{"id":56352,"date":"2023-09-03T04:26:14","date_gmt":"2023-09-03T08:26:14","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/avance-gas-attractive-yield-but-its-stock-is-relatively-expensive-otcmktsavacf\/"},"modified":"2023-09-03T04:26:19","modified_gmt":"2023-09-03T08:26:19","slug":"avance-gas-attractive-yield-but-its-stock-is-relatively-expensive-otcmktsavacf","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=56352","title":{"rendered":"Avance Gas: Attractive Yield, But Its Stock Is Relatively Expensive (OTCMKTS:AVACF)"},"content":{"rendered":"
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Investment Thesis<\/h2>\n

If your outlook on gas shipping is bullish and you want to diversify away from USD, you might have considered Avance Gas (OTCPK:AVACF). It has been a good alternative for the divided-oriented gas shipping investor for at least a year. Its ability to consistently deliver dividend yields close to 20% is attractive. While similar to its peer, BW LPG (<\/span>OTCPK:BWLLF), it exhibits a few characteristics that may appeal to some investors. Most importantly, being a part of shipping tycoon John Fredriksen’s portfolio of companies, the magnate holds close to 80 percent of shares.<\/span><\/p>\n

Avance Gas reported Q2 earnings of $37 million, the same as its previous record Q1, and “anticipate[s] doing even better in the second half of the year with expected TCE\/day in the third quarter in the high $50s compared to an average of mid $50\u2019s in the first half of the year[,]”, said Oystein Kalleklev, CEO, in its <\/span>latest quarterly earnings report.<\/span><\/p>\n

Its fleet is likely among the newest in the world, having an average age of 6.5 years, according to my calculations.<\/p>\n

In fact, if already announced sales (of 2008-built Iris Glory) and deliveries (two new dual fuel VLGCs in Q1 2024) go forward as planned, its fleet age will be even lower – 6.2 years on average – at the end of Q1 2024, everything else equal.<\/p>\n

Unfortunately, its strong share price development during the past quarters has made it relatively expensive compared to its peers. It is about to embark on a new product offering (ammonia cargoes), which may or may not come to fruition, and has taken delivery of two VLGCs this year, further increasing its leverage. It is also running a very high dividend payout, which is not sustainable. However, in my estimation, there is still upside potential in its stock price. For this reason, I am rating Avance Gas as a weak buy.<\/p>\n

An alternative could be its peer, BW LPG, which has comparable yields and may have a more considerable upside potential in its stock price (at the time of writing, I have a long position in BW LPG).<\/p>\n

This analysis will be divided into three parts:<\/p>\n