Cool Company (Buy, TP: NOK133.00) - Upside potential outweighs risk

Despite soft freight markets, we believe Cool Company offers attractive upside potential at the current valuation, trading at an average 2025–2026e EV/EBITDA of 7.0x (FLNG 9.5x). If we assume spot rates matching opex translates to 10.0x, spot rates equal to the YTD 3-year TC rates would calculate to 6.2x (or NOK195/share at an 8.0x EV/EBITDA). We reiterate our BUY, but have cut our target price to NOK133 (160).

Q3 in line, DPS cut by 63%

EBITDA of USD 58m (ABGSCe at USD 59m, cons at USD 57m). Cuts back on dividend, introduces buybacks. Share to trade down 5% or more vs. peers.

Market has turned south, but still too cheap

Cool Company Minor model adjustments

We have slightly adjusted our estimates. We still believe the contracting of vessels set to come open remains key to solidifying the valuation. By fixing the available TFDE’s spot earnings days at USD60k/day and the second 2-stroke newbuild at USD90k/day until end-2026, we calculate an average DPS of NOK17 for 2025–2026e, which translates into a NOK170 share price at a 10% dividend yield. We do not consider these changes to be material, and we have not changed our BUY recommendation. We have sli...

30-40% NAV discount and yielding 15%

Minor changes to estimates. ABGSC '26e EBITDA +20% vs. consensus. TP of NOK 151 (155) – BUY.

No surprises, DPS still steady at 15% yield

EBITDA of USD 60m (ABGSCe at USD 60m, cons at USD 56m). Secures a 1YR TC, current market at USD ~60k/day. Share to trade up 1-2% vs. peers.

Minor changes, attractively priced

LNG trade increased 1% in H1'24, less than our 3% FY'24 forecast. Minor changes, sightly above cons for Q2. TP of NOK 155 (156) – BUY.

Cool Company (Buy, TP: NOK151.00) - Potential to raise earnings visibi...

The recent seasonal uptick in rates implies a fairly tight market and we believe in a healthy high season, with potential upside due to possibility for disruptions in US LNG exports and a rebound for European demand, widening the arbitrage and offering solid contract opportunities. Assuming Cool Company’s open TFDEs are contracted at the current 1-year TC rate and USD90k/day for the second newbuild, we see an average 2025–2026e NOK18 DPS, implying a ~NOK180 share price at a 10% dividend yield. W...

Cool Company Minor model adjustments

We have updated our estimates, owing to the Q1 report, and trimmed our 2024–2026e revenue. We still believe contracting of vessels set to come open remains the key to solidifying the valuation. We see upside potential on fixing available TDFE spot earnings days at current TC rates (USD65k/day) and the second newbuild securing a broadly similar rate as the recently announced contract, which would lift our average 2025–2026e dividend yield from c8% to 12%. We do not consider these changes to be ma...

Navigating a near-term lull

We expect a daunting orderbook to dent freight markets in the coming years, before the next wave of LNG export projects returning the market to healthy levels. Our BUYs on the LNGC names we cover reflect earnings visibility and attractive long-term rates underpinned by high newbuild prices, as we see the potential for a re-rating on still-building backlogs towards a brighter long-term future.

Yard response and dry bulk qualms

Our trip to South Korea and China revealed Chinese shipbuilders are seeking growth to take on Korea’s established yards who are facing constraints. An eagerness to add capacity is one of our takeaways, as well as a gloomy outlook for Chinese real estate, which in our view should inevitably weigh on dry bulk demand.

A brewing challenge for the yards

Our 17th Annual Energy & Shipping Conference was well attended by investors and industry executives showcasing the still-growing interest for the sectors. Limited yard capacity is fuelling high newbuilding prices and raising freight rate expectations for the vast fleet renewal necessary in the coming decade. Long lead times underpin a bullish supply story for much of shipping in the coming years, albeit exposed to geopolitical risks affecting trade patterns. Our overall impression was general op...

Cool Company (Buy, TP: NOK155.00) - All about contract execution

Cool Company’s contract backlog leaves exposure to what we believe will be a soft spot market in the years ahead due to a heavy delivery schedule, only partly countered by export growth. However, we still estimate a 10% average 2025–2026 dividend yield on our cUSD43k/day TFDE spot rate, and calculate upside potential to a c15% dividend yield on the current implied 2025–2026e TC rate. Thus, we reiterate our BUY, but have cut our target price to NOK155 (166), on our average 2025–2026e to reflect t...

Cool Company (Buy, TP: NOK166.00) - Undervalued potential

Despite the spot exposure to what we believe should be a challenging market in 2024–2025 given a hefty delivery schedule only countered by modest export growth, we find Cool Company undervalued, trading at a c12% dividend yield on our 2025 estimates, with a prudent USD43k/day TDFE spot rate assumption. Applying a spot rate equal to the five-year average implies a cNOK22 DPS for 2025, and cNOK180/share on a 12% dividend yield. We reiterate our BUY, but have lowered our target price to NOK166 (180...

Cool Company (Buy, TP: NOK180.00) - Potential to unlock value

The spot perception of Cool Company is weighing on its valuation. We find the stock attractively valued, considering the low hurdle to switch investor focus from spot rate concerns to steady yield and appealing value. With the potential for favourable long-term contracts diminishing, we highlight execution risk as the main risk factor to our valuation as we approach an uncertain 2024–2025 on considerable vessel deliveries outpacing demand growth prospects. We reiterate our BUY, but have cut our ...

Cool Company (Buy, TP: NOK190.00) - Attractive contract potential

We find Cool Company attractively valued, on fairly conservative assumptions, and see potential upside on contract announcements for vessels coming open in 2023–2025 in a supportive market during this winter season. We calculate a further 65% upside potential to our 2025e EPS and DPS assuming contracts at current TC rates for those vessels, implying a share price of ~NOK230 if applying a 12% dividend yield. We reiterate our BUY and NOK190 target price.

Cool Company (Buy, TP: NOK190.00) - Time for new contracts

We believe Cool Company remains attractively priced on a conservative basis, with upside potential to the time-charter agreements for the five vessels that are available for hire between now and end-2024, with favourable market conditions into the high season. From current long-term charter rates, we see ~65% upside potential to the share price if the company were to contract the available vessels until end-2025, using 2025e DPS and 12% dividend yield. We reiterate our BUY and have raised our ta...

Cool Company (Buy, TP: NOK189.00) - 70% upside to 2025e in reach

Adding the two recent newbuilds from H2 2024 has raised our 2024–2025e EBITDA by 4–28%. We find Cool Company attractively priced on conservative assumptions, and 70% additional upside to 2025e EPS and DPS from the current charter markets, which highlight favourable upside optionality in the investment case as we approach the seasonally stronger part of the year. We reiterate our BUY, but have trimmed our target price to NOK189 (193).

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