Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>The lows have likely been established for this correction, but a bottoming process would likely take weeks or potentially months and could come with more tests of the lows.</li>
<li>Japan's TOPIX and Nikkei 225 are each testing their respective downtrends. The EURO STOXX 50 is testing resistance in the 4040-4090 range. Germany's DAX is testing major resistance at 14,815-14,950.</li>
<li>It is likely that this initial 2-3 week bounce has run its course; stick with cyclical value and defensives, areas we have been focused on for most of 2022.</li>
</ul>


The lows have likely been established for this correction, but a bottoming process would likely take weeks or potentially months and could come with more tests of the lows.
Japan's TOPIX and Nikkei 225 are each testing their respective downtrends. The EURO STOXX 50 is testing resistance in the 4040-4090 range. Germany's DAX is testing major resistance at 14,815-14,950.
It is likely that this initial 2-3 week bounce has run its course; stick with cyclical value and defensives, areas we have been focused on for most of 2022.


Sticking With Cyclical Value and Defensives; Adding Large-Cap Japan Technology

LNG, Oil & Gas, M&A Market Intelligence Specialist

Massimo Bellino

Thematic (Sector/Industry)

After a prolonged downturn that lasted more than three years, the LNG shipping industry is at an inflexion point as the recent surge in the spot LNG charter rates could underpin a new period of growth.
While the spike in the spot charter rates to record levels was driven by a sudden and to some degree unexpected shortage of available LNG carriers for the spot market, the underlying industry fundamentals had been improving for over a year.
The growth in LNG demand that started in 2017 is continuing in 2018. Imports by China have grown 43% this year compared to the same period in 2017 while global LNG demand is up 8% (YoY). Long-term LNG demand forecasts have been upgraded to the upside.
Global LNG capacity additions, expected to reach a record level in 2018 of 47 mtpa, will continue throughout 2019 and 2020 totalling an aggregate capacity of around 55 mtpa.
As the majority of new LNG additions are coming from the US, the average voyage distance required to reach the Asian buyers is increasing. The LNG market is evolving into a more liquid market thanks to a growing number of trades exchanged on the spot market or under short-term periods (i.e. less than five years).
As a result, the number of carriers required for the spot market is increasing. This, together with cross-basin shipments and more frequent destination changes to exploit arbitrage opportunities, are all pushing up LNG spot shipping rates.
The limited number of non-committed LNG carriers in the order book before mid-2020 is also expected to negatively impact the number of carriers available in the spot markets for the next two to three years.
The peer group of companies involved in LNG shipping and the related FLNG and FSRU markets announced, in general, a set of positive third-quarter results, but are their market values fully reflecting the improved outlook in the industry? Our comparative analysis of historical EV to forward EBITDA valuation multiples will seek to answer that question.
<h2>Exhibit 1: LNG Shipping Peer Group Share Price Performance (LTM)</h2>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/072/011/original/ex1.png?1543816495" class="editor-image img-responsive" data-smartkarma-image-id="72011"></figure>
<div class="content-caption">
Source: Capital IQ and interpretation of data from Flex LNG 3Q18 presentation. As of 29 November 2018
</div>

After a prolonged downturn that lasted more than three years, the LNG shipping industry is at an inflexion point as the recent surge in the spot LNG charter rates could underpin a new period of growth.
While the spike in the spot charter rates to record levels was driven by a sudden and to some degree unexpected shortage of available LNG carriers for the spot market, the underlying industry fundamentals had been improving for over a year.
The growth in LNG demand that started in 2017 is continuing in 2018. Imports by China have grown 43% this year compared to the same period in 2017 while global LNG demand is up 8% (YoY). Long-term LNG demand forecasts have been upgraded to the upside.
Global LNG capacity additions, expected to reach a record level in 2018 of 47 mtpa, will continue throughout 2019 and 2020 totalling an aggregate capacity of around 55 mtpa.
As the majority of new LNG additions are coming from the US, the average voyage distance required to reach the Asian buyers is increasing. The LNG market is evolving into a more liquid market thanks to a growing number of trades exchanged on the spot market or under short-term periods (i.e. less than five years).
As a result, the number of carriers required for the spot market is increasing. This, together with cross-basin shipments and more frequent destination changes to exploit arbitrage opportunities, are all pushing up LNG spot shipping rates.
The limited number of non-committed LNG carriers in the order book before mid-2020 is also expected to negatively impact the number of carriers available in the spot markets for the next two to three years.
The peer group of companies involved in LNG shipping and the related FLNG and FSRU markets announced, in general, a set of positive third-quarter results, but are their market values fully reflecting the improved outlook in the industry? Our comparative analysis of historical EV to forward EBITDA valuation multiples will seek to answer that question.
Exhibit 1: LNG Shipping Peer Group Share Price Performance (LTM)


Source: Capital IQ and interpretation of data from Flex LNG 3Q18 presentation. As of 29 November 2018


Soaring Spot Charter Rates Could Herald a New Upcycle for the LNG Shipping Industry

Norway

Flex LNG Ltd. owns technology for liquefying natural gas.  The Company intends to outfit a flexible liquefied natural gas (LNG) carrier to both liquefy and transport the gas.

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FLEX LNG (FLNG US)

Sticking With Cyclical Value and Defensives; Adding Large-Cap Japan Technology

Sticking With Cyclical Value & Defensives; Adding Large-Cap Japan Technology. 2-3 week bounce has likely run its course with $TOPIX $Nikkei 225,...

Vermilion Research

Soaring Spot Charter Rates Could Herald a New Upcycle for the LNG Shipping Industry

After a prolonged downturn that lasted more than three years, the LNG shipping industry is at an inflexion point as the recent surge in the spot...

Massimo Bellino

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52-week Range

Market Cap (USDm)

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