FLEX LNG Eyes set on market outlook
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FLEX LNG Eyes set on market outlook Flex’s Q3 results were below expectations, but all eyes are set on the future. Market fundamentals continue to strengthen ahead of Flex taking delivery of its first four MEGI LNGCs next year. BUY recommendation reiterated and target price raised to NOK15.9 (14.7).
We are below consensus for 2018e and 2019e. We have raised our 2017e net profit by 2%, to USD-11.6m, as Q3 weakness was positively offset by an improved outlook for Q4. We have increased our 2018e and 2019e net profit due to lower financing costs that result from lower leverage on the USD315m credit facility. We are 5% below Bloomberg consensus EBITDA for 2018e and 11% below for 2019e.
Flex aims to fix LNGCs for 6–18 months, to leave vessels open by mid-2019. The company wants to use the current strength in the market by actively seeking 6–18 months’ employment on its first two vessels. Global delivery of LNGCs slows going in to 2019e, which according to the company, should promote an even stronger market.
Attractive financing package. The USD315m facility, financing three ships, has an accordion structure that allows upsizing of USD40m per vessel depending on contract coverage. More importantly, Flex can swap existing collateral (newbuilds 1-3) with the other newbuilds, which allows it to secure financing outside the facility – with improved pricing – if long-term employment is secured.
Higher US-Asia natural gas arbitrage boosts tonne-miles. The US-Asia natural gas price differential has more than doubled since August, to around USD6.5/mmBtu today, which has boosted US tonne-miles way above our forecasts. So far in Q4, 50% of US LNG export is headed to Asia: we had been forecasting a 35% share heading to Asia in 2018e. If the arbitrage remains wide open into 2018e and a 50% share of US volumes are in fact shipped to Asia, that would require an additional 4.5 LNGC, or about ~10% of the spot LNG fleet (assuming the spot market is defined as 10% of vessels above 100k Cu.M).
Reiterate BUY recommendation and target price raised to NOK15.9 (14.7). We have raised our target price based on 12x our end-2019e fully delivered run-rate EPS of NOK1.32 (previously NOK1.23). Our multiple is above the current 10.8x and is in line with the LNG peer group.
BUY
FLEX LNG Eyes set on market outlook Flex’s Q3 results were below expectations, but all eyes are set on the future. Market fundamentals continue to strengthen ahead of Flex taking delivery of its first four MEGI LNGCs next year. BUY recommendation reiterated and target price raised to NOK15.9 (14.7).
We are below consensus for 2018e and 2019e. We have raised our 2017e net profit by 2%, to USD-11.6m, as Q3 weakness was positively offset by an improved outlook for Q4. We have increased our 2018e and 2019e net profit due to lower financing costs that result from lower leverage on the USD315m credit facility. We are 5% below Bloomberg consensus EBITDA for 2018e and 11% below for 2019e.
Flex aims to fix LNGCs for 6–18 months, to leave vessels open by mid-2019. The company wants to use the current strength in the market by actively seeking 6–18 months’ employment on its first two vessels. Global delivery of LNGCs slows going in to 2019e, which according to the company, should promote an even stronger market.
Attractive financing package. The USD315m facility, financing three ships, has an accordion structure that allows upsizing of USD40m per vessel depending on contract coverage. More importantly, Flex can swap existing collateral (newbuilds 1-3) with the other newbuilds, which allows it to secure financing outside the facility – with improved pricing – if long-term employment is secured.
Higher US-Asia natural gas arbitrage boosts tonne-miles. The US-Asia natural gas price differential has more than doubled since August, to around USD6.5/mmBtu today, which has boosted US tonne-miles way above our forecasts. So far in Q4, 50% of US LNG export is headed to Asia: we had been forecasting a 35% share heading to Asia in 2018e. If the arbitrage remains wide open into 2018e and a 50% share of US volumes are in fact shipped to Asia, that would require an additional 4.5 LNGC, or about ~10% of the spot LNG fleet (assuming the spot market is defined as 10% of vessels above 100k Cu.M).
Reiterate BUY recommendation and target price raised to NOK15.9 (14.7). We have raised our target price based on 12x our end-2019e fully delivered run-rate EPS of NOK1.32 (previously NOK1.23). Our multiple is above the current 10.8x and is in line with the LNG peer group.
BUY
Redigert 20.01.2021 kl 10:46
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Simo
22.11.2017 kl 19:07
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http://www.fearnleys.no/weekly_issue/view/726/3
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