Tag Archives: Awilco LNG
The dynamics for LNG carriers have changed and the cyclical inflection point is definitively behind us as spot rates surge towards levels not seen in three years. We see utilization rising steadily towards the end of this decade, with corresponding improvements in earnings, vessel values and share prices. We reiterate our BUY recommendation on LNG carriers and highlight Flex LNG (TP 18) and GasLog (TP 22) as our top picks.
The company today announced a restructuring and recapitalization of the balance sheet by deferring charter hire payments to Teeky LNG Partners and a private equity placement of USD ~25m through a book building process. As we touched upon in our initiation in late April, today’s announced pro-rata equity issuance is a positive surprise, although at a heavy discount to last close. The restructuring/ refinancing also alleviates the challenging liquidity position we forecast, with the low cash point now at USD 6m in 4Q19E (-17m in 2Q19E previously). Although issuing equity at P/NAV ~0.25 is highly dilutive to our per share valuation, shareholders’ interests are well covered by the pro-rata participation and subsequent offering. Add the positive effects of increased market cap., share liquidity and reduced balance sheet risk, we reiterate our BUY recommendation, but lower our TP to NOK 5.6 (6.9) due to the dilution .
The company is too small for most institutional investors, and we see limited prospects for growth. Despite the share illiquidity and stretched liquidity position on our estimates, we believe there is upside to the share price based on the continued massive discount on steel and our positive sector view. We initiate coverage of Awilco LNG with a BUY recommendation and target price of NOK 6.9 (+7%).