KNOP: Takeover Proposal And Downgrade Will Shape Future Unit Performance

Analysts have lowered their price target on KNOT Offshore Partners to $10.00 from $15.00, citing the recent takeover proposal as well as adjusted expectations for future growth and valuation multiples.

Analyst Commentary

Bullish Takeaways

• Bullish analysts view the $10 price target as supported by the proposed takeover, which provides a clearer valuation floor and reduces downside risk.
• The transaction proposal is seen as a potential catalyst to crystallize value faster than a stand alone recovery in charter rates and utilization.
• Some see the revised target as aligning the unit price more closely with underlying cash flow generation, reducing the prior reliance on multiple expansion.
• Analysts note that the shift to a Neutral stance reflects a more balanced risk reward profile rather than a deterioration in operational execution.

Bearish Takeaways

• Bearish analysts highlight that the cut from $15 to $10 implies lower confidence in long term growth and limits the scope for upside beyond the offer level.
• The downgrade signals concern that the partnership may struggle to re rate meaningfully above the implied takeover valuation without significant operational or market improvements.
• There is caution that the takeover proposal could cap near term multiple expansion, constraining total return potential for existing unitholders.
• Some analysts point to reduced visibility on future dropdowns and fleet growth, which weighs on longer term distribution and earnings power assumptions.

What's in the News

• Knutsen NYK Offshore Tankers AS has made an unsolicited, non binding proposal to acquire an additional 70.8% stake in KNOT Offshore Partners LP for approximately $240 million. The company is offering $10 per unit in cash and seeking to take its ownership to 100%, subject to unitholder approval (Key Developments).
• The proposed buyout at $10 per unit effectively sets a valuation reference point for KNOT Offshore Partners. This aligns closely with revised analyst price targets and frames near term upside and downside scenarios for unitholders (Key Developments).
• Between July 2, 2025 and October 31, 2025, KNOT Offshore Partners repurchased 384,739 units, or about 1.1% of its outstanding float, for $3.03 million, completing the previously announced buyback program (Key Developments).
• The recently completed buyback, together with the pending takeover proposal, highlights a strategic shift toward returning capital to unitholders and may simplify the partnership’s ownership and capital structure (Key Developments).

Valuation Changes

• The fair value estimate has been reduced modestly from about $10.67 to $10.00 per unit, reflecting a more conservative assessment of intrinsic value.
• The discount rate has edged down slightly from approximately 10.68% to 10.64%, indicating a marginally lower required return in the valuation model.
• Revenue growth assumptions have fallen significantly, shifting from expected growth of around 2.18% to a projected decline of roughly 0.87%.
• The net profit margin is expected to improve slightly, rising from about 15.24% to 15.34%, suggesting a modest enhancement in underlying profitability.
• The future P/E multiple has been trimmed from roughly 9.11x to 8.74x, pointing to a somewhat more conservative view on the partnership’s earnings valuation.