Contract coverage turns MTM positive

Flex LNG (Buy, TP: NOK335.00) - 13% yield highly appealing

Flex LNG remains insulated in a challenging freight market, with only one vessel open into a potentially poor 2025, while the two positions for 2026 are still likely to see options extended into 2028. Lower rates have led to our minor near-term adjustments, but we see no reason to doubt its USD0.75 quarterly DPS, offering an attractive 13% dividend yield into better markets. We reiterate our BUY, but have cut our target price to NOK335 (345).

Q3 as guided, Q4 guided as expected

EBITDA of USD 70m (ABGSC and cons at 70m). Q4'24 guidance in line with expectations. Share to trade flat to slightly down vs peers.

Market outlook weakens further

Flex LNG Minor model adjustments

We have slightly adjusted our rate and financing estimates. We still forecast a healthy 2024–2026 dividend yield of 11% for Flex LNG. This is supported by its solid contract backlog with limited spot exposure in the next two years, mitigating risk to what we believe will become challenging freight markets. Additionally, we see upside potential to its cUSD80k/day average 2024–2026e TCE beyond the fixed contract period, with long-term charter rates (>5 years) of cUSD90k–100k/day. The Q3 results ar...

Flex LNG Minor model adjustments

We have updated our estimates for the Q2 results, updated guidance, and announced refinancing. We still see an attractive 2024–2026e dividend yield at 12%, supported by its solid contract backlog mitigating near- to medium-term market risk. We also see upside potential to our average 2024–2026e fleet-wide TCE of cUSD80k/day, with 5-year TC rates currently quoted at close to USD100k/day. We do not consider our estimate changes to be material, and we have not changed our BUY recommendation. We rei...

More upside than downside, but still a HOLD

Q2 much as guided, special dividend in H2'24?

EBITDA of USD 63m (ABGSC and cons at 66m). Q3'24 guidance slightly below expectations. Flat share price reaction.

Minor changes, fully priced

LNG trade increases 1% in H1'24, less than our 3% FY'24 forecast. In-line with cons ensus. HOLD, TP of USD 30 (unchanged).

Flex LNG (Buy, TP: NOK355.00) - Solid yield on mitigated market risk

On our estimates, Flex LNG offers an 11% average 2024–2026e dividend yield, which we find attractive given its solid contract backlog, mitigating near- to medium-term market risk. Looking beyond the current contract backlog, we find upside potential for our 2024–2026e USD80k/day average fleet-wide TCE, due to elevated and sticky newbuild prices implying a parity rate >25% above our estimates. We reiterate our BUY but have trimmed our target price to NOK355 (358).

Flex LNG Minor model adjustments

We have updated our estimates to factor in the Q1 results, the updated guidance, and recent market developments. We still believe Flex LNG is well-placed to navigate what we expect to be a soft freight market near-term and maintain its USD0.75 DPS, for a 10% run-rate yield. Additionally, we see potential upside to rates on new contracts due to elevated and sticky newbuild prices, implying a parity rate above USD100k/day, compared with our average fleet-wide TCE of cUSD80k/day for 2024–2026e. We ...

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...

Flex LNG (Buy, TP: NOK340.00) - Bankable dividend stream

Due to its sizeable backlog, we find Flex LNG well positioned to maintain a healthy USD0.75 quarterly DPS despite a challenging outlook for LNGC spot markets. In fact, we believe the long-term freight market, reflective of elevated and sticky newbuild prices, should stay above its current backlog and provide a backstop with potential upside to favourable extension options and new contracts. Thus, we believe yesterday’s share price drop was unwarranted and have upgraded to BUY (HOLD) and raised o...

Flex LNG (Hold, TP: NOK331.00) - Stable earnings backlog

Flex LNG’s solid contract backlog with only one vessel open from Q2 2024 and all other vessels on contracts until at least Q1 2027 (assuming options are exercised) should support its quarterly USD0.75 DPS for a c10% (12% excluding excess cash) run-rate dividend yield, and mitigate the risk to a possibly weak freight market due to hefty vessel deliveries and modest export growth near-term. However, we expect c22% global export growth in 2026–2027e to alleviate supply headwinds, which fits well wi...