SFL stock: reacting to tanker sales and new ammonia carrier deals
SFL (NYSE:SFL) has just reshaped part of its fleet by agreeing to sell seven tankers to Trafigura and committing to two new Very Large Ammonia Carriers on long term charters.
That fleet reshuffle is landing in a market where SFL’s share price has already been moving, with the stock at US$13.56 after a 22.05% 3 month share price return and a 71.86% year to date share price return, while total shareholder return over five years sits at 162.75%. This points to momentum that recent tanker sales and ammonia carrier newbuilds are likely reinforcing in investors’ minds as they reassess both growth prospects and risk profile.
Scan for other shipping and infrastructure plays that are actively recycling capital, similar to how SFL is doing with its fleet reshuffle, by reviewing the curated list of solid balance sheet and fundamentals (25 results).
After that kind of share price run, and a fresh US$275 million capital inflow from tanker sales, the real tension is whether SFL’s fair value lines up with price, analyst targets and intrinsic estimates.
Most Popular Narrative: 3% Overvalued
SFL is trading at $13.56 against a widely followed fair value estimate of about $13.17. The narrative market view is that price is slightly ahead of intrinsic value and largely baking in the current backlog and fleet plan.
The company’s expanding long term charter backlog, which reached roughly US$4.6b with about US$750 million added from the Hapag Lloyd container extensions and a large share contracted to investment grade counterparties, supports visibility on future revenue and provides a base for steady earnings and dividend coverage.
See why 15 investors see SFL as 3% overvalued.
Result: Fair Value of $13.17 (OVERVALUED)
Still, the SFL story relies on smooth execution. Any setback on the US$1.2b growth capex or weaker demand for large container vessels could quickly challenge this fair value narrative.
Find out about the key risks to this SFL narrative.
Next Steps
Mixed sentiment around SFL’s valuation and risk reward profile only matters if you pressure test it yourself, then weigh the 2 key rewards and 2 important warning signs.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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