HÖEGH LNG HOLDINGS Three SOTP scenarios
Volf
17.11.2017 kl 09:16
1711
Sakset fra DNB engelske analyser
HÖEGH LNG HOLDINGS Three SOTP scenarios We reiterate our BUY recommendation but have lowered our target price from NOK112 to NOK90 based on a probability weighting on the existing order backlog. We calculate a SOTP of NOK71 without Ghana, Pakistan, and Chile while a SOTP of NOK46 if four FSRUs end up trading as LNGC, showing how much negativity is reflected in the current share price.
Lowered estimates to reflect contract delays. We have lowered 2017e net profit by 8%, by 7% for 2018e, while raising 2019e by 3%. We are 3% below Bloomberg consensus EBITDA for 2017e, 1% above for 2018e, while 6% above for 2019e.
SOTP of NOK105 if existing order backlog becomes a reality. We calculate an updated SOTP of NOK105 (down from NOK111) when we include the NPV of existing order backlog. The lower SOTP is a result of a lower share price in Höegh LNG Partners, delays to contract start-up, and USD260m in FSRU steel value (USD270m).
SOTP of NOK71 without Ghana, Pakistan, Chile. When comparing the Q2 project update with that of Q3, Pakistan has changed from being on track to Höegh LNG Holding evaluating its options as the consortium has been dissolved, the Ghana project is still pending a government decision on solution and supplier, while in Chile the revised environmental impact study continues and there is no guidance on timing (previously anticipated finalisation towards 2018e). In our SOTP we have an added NPV of USD309m in contracted cash flows for the three contracts, or NOK34/share, hence our SOTP adj. for current order backlog would decline to NOK71.
SOTP of NOK46 if four of the FSRUs end up trading LNGC – ultimate downside. To show what we view as the ultimate downside in valuation, we have calculated a SOTP of NOK46, which assumes that one open FSRU, Ghana, Pakistan, and Chile FSRU would all end up trading as LNGC and if making shipping returns, the value is ~USD60m lower per ship. Hence the SOTP would decline to NOK46. We view this highly unlikely given the amount of LNG that would come to market in the years.
Reiterate BUY recommendation, target price lowered to NOK90, from NOK112, based on a probability adjusted SOTP where we have applied a 50% probability on Ghana and Pakistan while 75% on Chile given the uncertainty of both new contract announcements and future development of the existing order backlog.
HÖEGH LNG HOLDINGS Three SOTP scenarios We reiterate our BUY recommendation but have lowered our target price from NOK112 to NOK90 based on a probability weighting on the existing order backlog. We calculate a SOTP of NOK71 without Ghana, Pakistan, and Chile while a SOTP of NOK46 if four FSRUs end up trading as LNGC, showing how much negativity is reflected in the current share price.
Lowered estimates to reflect contract delays. We have lowered 2017e net profit by 8%, by 7% for 2018e, while raising 2019e by 3%. We are 3% below Bloomberg consensus EBITDA for 2017e, 1% above for 2018e, while 6% above for 2019e.
SOTP of NOK105 if existing order backlog becomes a reality. We calculate an updated SOTP of NOK105 (down from NOK111) when we include the NPV of existing order backlog. The lower SOTP is a result of a lower share price in Höegh LNG Partners, delays to contract start-up, and USD260m in FSRU steel value (USD270m).
SOTP of NOK71 without Ghana, Pakistan, Chile. When comparing the Q2 project update with that of Q3, Pakistan has changed from being on track to Höegh LNG Holding evaluating its options as the consortium has been dissolved, the Ghana project is still pending a government decision on solution and supplier, while in Chile the revised environmental impact study continues and there is no guidance on timing (previously anticipated finalisation towards 2018e). In our SOTP we have an added NPV of USD309m in contracted cash flows for the three contracts, or NOK34/share, hence our SOTP adj. for current order backlog would decline to NOK71.
SOTP of NOK46 if four of the FSRUs end up trading LNGC – ultimate downside. To show what we view as the ultimate downside in valuation, we have calculated a SOTP of NOK46, which assumes that one open FSRU, Ghana, Pakistan, and Chile FSRU would all end up trading as LNGC and if making shipping returns, the value is ~USD60m lower per ship. Hence the SOTP would decline to NOK46. We view this highly unlikely given the amount of LNG that would come to market in the years.
Reiterate BUY recommendation, target price lowered to NOK90, from NOK112, based on a probability adjusted SOTP where we have applied a 50% probability on Ghana and Pakistan while 75% on Chile given the uncertainty of both new contract announcements and future development of the existing order backlog.
Redigert 20.01.2021 kl 00:58
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Sonatrach
17.11.2017 kl 11:27
1708
Arctic reduserer kursmål fra 120 til 75 kroner:
• Adjusted results slightly better than expected – HLNG reported Q3/17 EBITDA of USD 31.6m and EPS of USD 0.02 vs our expected EBITDA of USD 36.7m and EPS of USD 0.09. Adjusted for non-recurring items, EBITDA and net profit were USD 40.6m and USD 10.8m for the quarter, which was better than our net profit estimate of USD 6.9m and consensus’ USD 8.4m. Hoegh declared a dividend of USD 0.125/share as we had expected.
• Pakistan consortium dissolved, limited news on Ghana and Chile – Due to the consortium not agreeing on terms, it was terminated in mid-November and hence the 20-year FSRU contract with GEI was essentially as well, although Hoegh is evaluating its options. This is clearly a setback as the contract was expected to commence in H2/18 and add annual EBITDA of USD ~36m. In Ghana, HLNG is still waiting for governmental approval, where Hoegh Giant is planned to work on a 20-year contract with Quantum Power. The unit however entered into a 3-year TC with GNF with start up early 2018, where it will operate as an LNGC until GNF puts it into FSRU operations. Although we would obviously prefer Giant operating as an FSRU on its originally planned project from the beginning, this solution is far better than burning cash in the LNGC spot market with lower utilization, especially given Hoegh’s full substitution rights for the unit. In Chile, we expect start-up in H1/20, but we’re still missing a FID and firm project timeline.
• Arctic Buy, but reduce target price to NOK 75 after reconsidering valuation contribution elements – HLNG has 3x FSRUs with contract start-ups expected between end/18 and early/20, as well an uncommitted FSRU newbuilding. These units have the potential of adding substantial earnings and dividend capacity, but as we have seen this year, FSRU projects are complex and delays have occurred due to factors outside of HLNG’s control.
However, Hoegh remains confident it will secure further earnings growth through additional FSRU contract awards, which is in line with our underlying view of a world of growing LNG trade and HLNG’s key standing within the FSRU space. Hoegh further notes that they have clear contingency plans for all their units, and that they are in the final rounds of several tender processes in Europe, Asia and the Middle East for startup dates between 2018 and 2021, including FSRU #9 and #10. For each new contract announced on these two units, we see a NOK ~9/share upside, assuming similar economics as Hoegh Giant.
We believe the share is trading close to fair value given the setbacks and uncertainties that have emerged in recent months, but given our long-term positive view on the market for FSRUs and LNG trade in general, we believe a bit too much scepticism is priced into the share price at the current level.
• Adjusted results slightly better than expected – HLNG reported Q3/17 EBITDA of USD 31.6m and EPS of USD 0.02 vs our expected EBITDA of USD 36.7m and EPS of USD 0.09. Adjusted for non-recurring items, EBITDA and net profit were USD 40.6m and USD 10.8m for the quarter, which was better than our net profit estimate of USD 6.9m and consensus’ USD 8.4m. Hoegh declared a dividend of USD 0.125/share as we had expected.
• Pakistan consortium dissolved, limited news on Ghana and Chile – Due to the consortium not agreeing on terms, it was terminated in mid-November and hence the 20-year FSRU contract with GEI was essentially as well, although Hoegh is evaluating its options. This is clearly a setback as the contract was expected to commence in H2/18 and add annual EBITDA of USD ~36m. In Ghana, HLNG is still waiting for governmental approval, where Hoegh Giant is planned to work on a 20-year contract with Quantum Power. The unit however entered into a 3-year TC with GNF with start up early 2018, where it will operate as an LNGC until GNF puts it into FSRU operations. Although we would obviously prefer Giant operating as an FSRU on its originally planned project from the beginning, this solution is far better than burning cash in the LNGC spot market with lower utilization, especially given Hoegh’s full substitution rights for the unit. In Chile, we expect start-up in H1/20, but we’re still missing a FID and firm project timeline.
• Arctic Buy, but reduce target price to NOK 75 after reconsidering valuation contribution elements – HLNG has 3x FSRUs with contract start-ups expected between end/18 and early/20, as well an uncommitted FSRU newbuilding. These units have the potential of adding substantial earnings and dividend capacity, but as we have seen this year, FSRU projects are complex and delays have occurred due to factors outside of HLNG’s control.
However, Hoegh remains confident it will secure further earnings growth through additional FSRU contract awards, which is in line with our underlying view of a world of growing LNG trade and HLNG’s key standing within the FSRU space. Hoegh further notes that they have clear contingency plans for all their units, and that they are in the final rounds of several tender processes in Europe, Asia and the Middle East for startup dates between 2018 and 2021, including FSRU #9 and #10. For each new contract announced on these two units, we see a NOK ~9/share upside, assuming similar economics as Hoegh Giant.
We believe the share is trading close to fair value given the setbacks and uncertainties that have emerged in recent months, but given our long-term positive view on the market for FSRUs and LNG trade in general, we believe a bit too much scepticism is priced into the share price at the current level.