Frontline Ltd (NYSE:FRO) struggles to sustain the lacklustre demand situation


Dallas, Texas 10/07/2013 (Financialstrend) – On October 3, the stock of ship building company Frontline Ltd (NYSE:FRO) was trading at 42.57 per share. It was down 1.53% from its previous day close.  It attracted very less volumes with only 532100 shares changing hands. In comparison, 1.26 million shares of the stock are trading on a daily basis on average. Over the past one month the stock has shed close to 0.39% of its value and is down 1.91% from its previous week. At current valuations, the share price reflects a 36% dip over its 52 week high valuation and a 50% appreciation on its 52 week low pricing.

The stock which has close to $78 million in shares outstanding has only 29% of its stock vested with institutional investors while 4.7% is held by insiders of the company. With demand for oil from China dipping in the back drop of its slowing down economy, the demand for tankers has also directly been impacted. This slow down in the tanker business can be seen by looking at the quarter results of Frontline. Its sales over the previous quarter are down 26% with earning per share plummeting down by 750%. Its profit margin and operating margin are both down at 5.2% and 35.8% respectively.

Analysts believe that with a market cap of $200 million with accumulated losses of $203 million, it is more than likely that the stock is going to shed some more of its market valuation to settle at $2 by the end of the year. FRO is not alone in these downcast sentiments for oil tankers. Trade watchers look back to 1997 as a bench mark for the fall in demand that the shipping and in particular oil tankers are going through currently. As per a report published by ship broker Clarkson, daily earnings have plunged by 77% to hit bottom at $4450 for the industry. FRO had disclosed that its break even daily earnings is at a $25,000 per day highlighting the huge stress on the company to sustain operations.