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Dorian LPG LTD. (LPG), Mid/Small Cap AI Study of the Week

Dorian LPG LTD. (LPG), Mid/Small Cap AI Study of the Week

October 3, 2024

Weekly AI Study from the S&P 400 or S&P 600

Company Overview

Dorian LPG Ltd. (Dorian) specializes in the transportation of liquefied petroleum gas (LPG) using a fleet of very large gas carriers (VLGCs). The company, incorporated in the Marshall Islands and headquartered in the U.S., operates a fleet of twenty-five VLGCs with a total carrying capacity of about 2.1 million cubic meters. Their fleet includes fuel-efficient ECO-design VLGCs, dual-fuel Panamax size VLGCs, and vessels equipped with scrubbers to reduce emissions. Dorian also co-manages the Helios LPG Pool LLC, a joint venture with MOL Energia Pte. Ltd., enhancing market coverage and revenue sharing from a pool of thirty VLGCs. Notably, Dorian has agreed to build a new Very Large Gas Carrier/Ammonia Carrier (VLGC/AC) with a capacity of 93,000 cbm, expected to be delivered in 2026, indicating a potential new revenue stream in ammonia transport.

Dorian LPG operates primarily in the international seaborne LPG transportation industry, with its fleet engaged in significant routes such as the Arabian Gulf to Asia and the United States to Europe and Asia. Revenue is largely generated through the Helios Pool, working with major energy companies and commodity traders. The company emphasizes its modern, ECO-class fleet to stay competitive amid stringent environmental regulations. Dorian employs a balanced strategy, utilizing various charters to mitigate market volatility, and prioritizes human capital management with comprehensive compensation and benefits for shore-based staff. Following the COVID-19 pandemic, Dorian implemented health and safety measures for employees and continues to support training and development opportunities, including accommodations for Ukrainian and Russian seafarers amid the Russia-Ukraine conflict.

Dorian LPG places a strong emphasis on safety, operational risk management, and extensive insurance coverage to mitigate risks, including cyber-attacks, pollution, and business interruptions. Their insurance coverage includes hull and machinery insurance against marine and war risks, protection and indemnity (P&I) insurance for legal liabilities, and loss of hire insurance to cover income loss from vessel downtime. Committed to Environmental, Social, and Governance (ESG) standards, Dorian focuses on reducing its carbon footprint and greenhouse gas emissions through initiatives like operating energy-efficient vessels and fitting scrubbers. They are active in industry efforts to meet sustainability targets, including joining the Getting to Zero Coalition and the Poseidon Principles. Dorian LPG also promotes diversity, equity, and inclusion, as evidenced by their involvement in The All Aboard Alliance and the launch of the Diversity@Sea initiative. The shipping industry, and Dorian LPG, are regulated by numerous international, national, and local laws concerning safety, health, and environmental protection, requiring significant compliance expenses. Regular inspections ensure adherence to these regulations, with potential future regulations possibly imposing additional costs and operational requirements.

By the Numbers

Annual Report (FY 2024 vs. FY 2023):

  • Total revenues: Increased by $171 million (43.9%) from $389.7 million to $560.7 million.
  • Helios Pool contribution to revenues: Increased to 95% in FY 2024 from 94% in FY 2023.
  • Time charters contribution to revenues: Decreased to 4.6% in FY 2024 from 5.8% in FY 2023.
  • Other revenues: Decreased to 0.3% in FY 2024 from 0.6% in FY 2023.
  • Vessel operating expenses: Increased by 12.5% to $80.5 million ($10,469 per vessel per day) from $71.5 million ($9,793 per vessel per day).
  • Depreciation and amortization: Increased by 8.3% to $68.7 million.
  • General and administrative expenses: Increased by 21.6% to $39.0 million.
  • Interest and finance costs: Increased by $2.7 million to $40.5 million.
  • Adjusted EBITDA: Increased to $417.4 million from $271.4 million.
  • Dividend declared: $1.00 per share, totaling $40.6 million.
  • Market value of vessels: Higher than carrying value by $588 million in 2024, up from $270.2 million in 2023.

Quarterly Report (Q2 2024 vs. Q2 2023):

  • Revenues: Increased to $114.4 million from $111.6 million (2.5% increase).
  • Net pool revenues: Increased by $5 million (4.8%).
  • Time charter revenues: Decreased by $3 million (46.8%).
  • Vessel operating expenses: Increased by 3.2% to $20.5 million.
  • Interest and finance costs: Decreased by $0.9 million to $9.5 million.
  • Interest income: Increased by $2 million to $3.7 million.
  • Adjusted EBITDA: Improved to $78 million from $74.8 million.
  • Net income: Slightly decreased from $51.72 million to $51.29 million.
  • Fleet utilization rate: Decreased to 90.4% from 98.0%.
  • Time charter equivalent rate: Increased to $55,228 from $51,156.
  • Cash and cash equivalents: $353.3 million.
  • Long-term debt: $592.1 million.
  • Share issuance: 2 million shares at $44.50 each, raising approximately $84.4 million.
  • Net cash from operations: Decreased to $41.2 million from $63.3 million.
  • Dividend declared: $1.00 per share, totaling $42.6 million.
  • Commitments under newbuilding contracts: Approximately $98.4 million.