Tanker And Dry Bulk Order Books Will Restrain Margins While Contract Backlog Supports Stability

Catalysts

About Cmb.Tech

Cmb.Tech operates a diversified shipping group active in dry bulk, tankers, containers, chemicals and offshore wind support vessels.

What are the underlying business or industry changes driving this perspective?

• Although the dry bulk order book to fleet ratio for Capesizes is described as manageable at 12.4%, the recent increase in ordering for delivery in 2028 and 2029 could still cap asset values and day rates over time. This would limit upside to revenue and EBITDA from the current level of spot exposure.
• While Cmb.Tech has secured a US$3.05b contract backlog and is adding multi year charters across dry bulk, tankers, containers and chemicals, the gradual shift from spot exposure to fixed coverage could lock in rates that later look less attractive if market conditions soften. This would restrain future earnings growth relative to current spot driven EBITDA.
• Despite strong crude and product tanker earnings and supportive fundamentals today, the expanding VLCC and Suezmax order book from 2028 onward, combined with uncertainty around scrapping, creates a credible scenario where fleet growth outpaces trade growth and puts pressure on utilization. This would weigh on freight income and operating margins in the tanker division.
• Although the offshore energy unit Windcat is currently benefiting from improving activity in both offshore wind and oil and gas, the ability of CSOVs and CTVs to switch between these markets depends on continued project progress and day rate support. Any slowdown in project sanctions or prolonged softness in one of the end markets could therefore reduce utilization and dilute group level margin resilience.
• While Cmb.Tech is investing in ammonia powered vessels and related bunkering logistics in China, the economics of low carbon fuels still rely heavily on carbon pricing and regulatory support. These factors may evolve more slowly or unevenly than expected and could delay the point at which these assets contribute meaningfully to net profit and return on invested capital.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more pessimistic perspective on Cmb.Tech compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Cmb.Tech's revenue will grow by 5.9% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 9.7% today to 13.9% in 3 years time.
• The bearish analysts expect earnings to reach $274.5 million (and earnings per share of $0.4) by about March 2029, up from $161.7 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $721.5 million.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 20.5x on those 2029 earnings, down from 22.3x today. This future PE is greater than the current PE for the GB Oil and Gas industry at 18.8x.
• The bearish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.7%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Sustained strength in dry bulk markets, supported by ton mile growth in iron ore and bauxite and a Capesize order book to fleet ratio described at 12.4%, could keep utilization high for CMB.TECH's large spot exposed Bocimar fleet and push dry bulk revenue and EBITDA above what a flat share price would typically reflect.
• Very strong crude and product tanker conditions, with VLCC and Suezmax spot earnings around US$75,000 and US$60,000 to US$65,000 a day in Q4 and Q1 to date and management describing the tanker market as very high, could support higher freight income and net profit than implied by an unchanged valuation.
• Execution of the US$3.05b contract backlog and ongoing appetite to add multi year charters across dry bulk, tankers, containers and chemicals could increase earnings visibility and support higher multiples if investors place a premium on stable cash flows and improving net margins.
• Windcat's exposure to both offshore wind and offshore oil and gas, where management reports good day rates for CSOVs and CTVs and expects more offshore wind projects in the North Sea and Europe, could drive outsized growth in offshore revenue and margin contribution relative to a flat share price view.
• Active capital allocation, including more than US$420 million in locked in capital gains on vessel sales, repayment of the US$1.3b Golden Ocean bridge facility, a net profit of US$140 million in 2025 and an interim dividend of US$0.16 a share, could support higher returns of capital and reduced leverage, which may justify a higher earnings multiple and a rising share price.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Cmb.Tech is €10.97, which represents up to two standard deviations below the consensus price target of €13.46. This valuation is based on what can be assumed as the expectations of Cmb.Tech's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €15.82, and the most bearish reporting a price target of just €10.97.
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be $2.0 billion, earnings will come to $274.5 million, and it would be trading on a PE ratio of 20.5x, assuming you use a discount rate of 7.7%.
• Given the current share price of €10.76, the analyst price target of €10.97 is 2.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.