GE Shipping rallies 11%; stock hits 52-week high on heavy volumes

Shares of Great Eastern (GE) Shipping hit a 52-week high of Rs 459.20 as the stock rallied 11 per cent on the BSE in Tuesday’s intra-day trade on the back of heavy volumes. The stock surpassed its previous high of Rs 445.50 that it had touched on May 18, 2022.

At 12:06 PM; GE Shipping traded 10 per cent higher at Rs 455, as compared to 0.15 per cent rise in the S&P BSE Sensex. The trading volumes on the counter jumped over six-fold as 2.3 million equity shares representing 1.56 per cent of total equity of GE Shipping changed hands on the BSE and NSE so far.

On July 6, 2022, the company decided to close the share buyback offer after 6 months from the date of the opening of the buyback. The company bought back 4.199 million equity shares, which represents 59.21 per cent of the maximum buyback size, utilizing Rs 133.22 crore. The equity shares were bought back at an average price of Rs 316.21 per equity share.

The board of the company on December 27, 2021, had approved buyback of shares aggregating up to Rs 225 crore at a price not exceeding Rs 333 per share.

Meanwhile, in the past six months, GE Shipping outperformed the market as it surged nearly 43 per cent on rise in crude tanker freight rates. In comparison, the S&P BSE Sensex was down 9 per cent during the same period.

Crude tanker freight rates remained around opex levels for most of the year in FY22 but experienced a sudden spurt starting end-Feb 2022 due to the Russia-Ukraine conflict.

“Rates witnessed a sudden spurt in March 2022 due to the Russia-Ukraine conflict, which prompted western countries to impose sanctions against Russia. Although energy was excluded from the sanctions, the usual trade patterns were disrupted by self-sanctioning by many companies and owners’ unwillingness to all Russian ports. As usually happens, the inefficiency caused by the disruption led to more demand for ships, which pushed freight rates up. This was more pronounced in the Aframax sizes,” GE Shipping said in FY22 annual report.

Analysts expect the demand for oil products to rise as economies across the world continue to remove Covid related restrictions. With crude oil and oil products inventory significantly below 5-year average levels, incremental oil demand is expected to be increasingly met by seaborne trade.

Further, OPEC+ will continue to unwind their production cuts, which would increase crude supply in the market. With oil prices above USD 100/bbl, non-OPEC countries, particularly the US, are also expected to increase their crude production. However, macro worries, driven by high commodity prices and rising interest rates or inflation, will be an overhang over world GDP growth and therefore oil demand growth.

"Apart from demand side factors, the Russia-Ukraine conflict is likely to be a significant driver of the tanker market in the short term. Sanctions are likely to take a toll on Russian exports, thereby reducing seaborne volumes. On the other hand, sanctions may boost ton-miles as Russian exports increasingly shift towards Asian countries and Europe replaces Russian oil with distant sources like North America, West Africa and the Middle East," the company said.

The orderbook for crude and product tankers are around 7 per cent and 5 per cent of the fleet, respectively, the lowest level seen in the last 25 years. Therefore, the management believes that the fleet supply growth is likely to remain under control, especially considering that most of the yard slots are booked through till end of 2024.