Golar LNG - Weak prospects to weigh on Golar LNG share price
We maintain Neutral rating on Golar LNG because of weak LNG prospects ahead, but expect limited downside to its share price as thestock has already declined 41.4% YTD 2020 (as of 18 June 2020). We forecast the company’s spot earnings on LNG vessels to decline
and FLNG expansion plans to be adversely impacted. Golar LNG has received force majeure notice from BP Plc on Golar Gimi FLNG
conversion project. With force majeure imposed for one year, the company stated that it is discussing with Keppel to postpone the
construction of the vessel for a year but no decision been taken so far. We believe this will negatively impact the company’s future cash
flows from this project as Golar LNG will need to continue paying interest on debt raised while project-related positive cash flows will be
delayed. However, the start-up of the company’s power plant in Brazil is a positive development. Factoring in the above, we used the
SOTP methodology to arrive at a fair value of USD 8.60 per share, an upside of 2.6%.
Golar LNG is a midstream liquefied natural gas (LNG) company based in Bermuda. Co. is engaged in the transportation, regasification, liquefaction and trading of LNG. Through its subsidiaries and affiliates, Co. is engaged in the acquisition, ownership, operation and chartering of LNG carriers and floating storage regasification units (FSRUs), and the development of liquefaction projects such as Floating Liquefaction Natural Gas Vessels. Co. owns and operates a fleet of 19 LNG carriers and seven FSRUs, and under management agreements operates Golar LNG Partner LP's fleet of six FSRUs and four LNG carriers.
Drewry, since 1970, has been providing research and advisory services on the global Maritime and Shipping industries and has established itself as a firm with long history of credibility and expertise on various aspects of the maritime industry. Leveraging this in-depth market knowledge and understanding, we have extended our offering to deliver a unique, independent investment research service on globally listed companies operating in the maritime industry. Under the brand Drewry Maritime Equity Research and in accordance with the FCA, DMER led by Rahul Kapoor and his team, offers fundamental analysis on listed companies. DMER analysts have access to one of the most up-to-date, comprehensive and reliable sources of market insight and research data available today. By combining these market-leading resources with seasoned sector expertise and commercial awareness, we are able to offer a highly differentiated and comprehensive investment research service to prospective investors in listed maritime companies. We look at globally listed companies within the following sectors: Port Operators, Container Shipping, Container Manufacturing & Leasing, LNG Shipping, Dry Bulk Shipping and Tanker Shipping. Combine in-depth sector expertise with financial analysis focusing on over 50 stocks globally.
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