JPMorgan sees 50% upside in Scorpio Tankers, starts at Overweight

JPMorgan analyst Samuel Bland initiated coverage of Scorpio Tankers with an Overweight rating and $87 price target, implying 50% upside potential. The company is "undergoing a sharp inflection in prospects," moving from weak earnings and over-leverage to strong earnings and rapid deleveraging, with a current free cash flow yield of 30%, the analyst tells investors in a research note. The firm thinks Scorpio’s next two years will remain strong, and says "this alone creates material upside to the share price." There is a long run trend of seaborne trade of oil products growing faster than crude, and this differential will continue, based on the geographic mix of demand and expected refinery capacity additions, contends JPMorgan.