Analysts: Aegean, World Fuel Services Set for Growth Following OW Bunker Collapse

Aegean and World Fuel Services could gain from OW Bunker's collapse, according to investment analysts.

Aegean Marine Petroleum Network Inc. [NYSE:ANW] (Aegean) and World Fuel Services Corp. [NYSE:INT] (WFS) look well placed to grow following the collapse of OW Bunker, according to investment analysts.

Nasdaq on Friday suggested that Aegean's business model would allow it to capitalise on events following revelations last week that OW Bunker has collapsed following a $125 million fraud and an unexpected $150 million hedging impairment.

"The prospect [for Aegean] of operating without a major competitor should more than make up for any further falls in oil and the current levels were fully priced into [Aegean's] stock when the bad news about OW began to surface."

Nasdaq said that aside from the fraud issue, OW Bunker's business model meant it was hard hit by its hedging strategy and a falling oil price, but Aegean is not as vulnerable these problems.

"Aegean's business model is differentiated enough from that of OW to make a repeat of the same problems unlikely," says the Nasdaq report.

"[Agean] operates more like a retailer than what many think of when they think of a company in the oil business."

"They will make a margin whatever the price of the product."

Seperately, investment site Seeking Alpha on Friday pointed to WFS as a likely benefactor of OW Bunker's demise.

According to WFS's own figures, its Marine business accounts for some 12 percent of world bunker sales volumes across a diverse customer base, but the report says gross margins for the company's Marine business have been on a downward trajectory for the previous five years.

Improved Margins

The report suggests that OW Bunker's sales volume growth may have come at the expense of profitability, at least in part as a result of aggressive pricing, which has in turn weighed on margins for competitors such as WFS.

OW Bunker's exit from the market may thus have the effect of improving margins at WFS.

But WFS is still prone to the same market forces by which OW Bunker has been hit, namely "the traditional risk of running any business like this on tight margins and vacillating commodity prices," says Seeking Alpha.

Last year it was revealed that of all companies in the Fortune 500, WFS has grown the fastest over the past decade, outpacing even consumer technology giant Apple Inc.