Golar LNG Limited

Golar LNG Limited (NASDAQ: GLNG)  is a liquefied natural gas (LNG) midstream company that specializes in LNG transportation, regasification, liquefaction, and trading. The Company's activities include the purchase, ownership, operation, and chartering of floating LNGs (FLNGs), Floating Storage Regasification Units (FSRUs), LNG carriers, and the development of gas to power projects and small-scale distribution operations.

Why Should Investors Book Profit?

• Weak Liquidity Profile: The company's current ratio at the end of FY21 is 0.71x, compared to the industry median of 1.06x. This implies relatively lackluster liquidity profile against the industry median.
• Low Margin Profile: In FY21, GLNG reported Pre-tax margin of -1.8% in the period under consideration which was lower than the 2.2% reported in the previous financial year. GLNG’s reported net margin was -2.1% vs. the industry median of 2.3%.
• Leveraged Balance Sheet: The company is more exposed to balance sheet risk than its peers, with a Debt/Equity ratio of 1.39x as of December 31, 2021, compared to the industry norm of 0.62x.
• Risk Associated with FLNG Conversions: FLNG conversion work is highly technical, and it is typically performed by a small number of contractors with the appropriate skills. As a result, transferring contractors for any reason might result in higher costs and severe delays in delivery schedules, putting the company's finances at risk.
• Charted into Overbought Zone: GLNG shares have charted into an overbought zone, as the leading momentum indicator, 14-day RSI hovering at 80.03 on the daily price chart, typically considered as an overbought territory. Also, stock ended above the upper band of the Bollinger Band© indicates a price consolidation in near term.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

GLNG's share price has inclined 54.51% in the past six months and is currently leaning towards the higher band of the 52-week range of USD 9.26 to USD 18.31. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 15.97.

Considering the company's low margin profile, leveraged balance sheet, weak liquidity profile, current valuation and associated risks. We recommend a "Sell" rating on the stock at the closing price of USD 18.14, up 3.13% as of March 03, 2022.

One-Year Technical Price Chart (as of March 03, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Teekay Tankers Ltd.

Teekay Tankers Ltd. (NYSE: TNK) is a multinational shipping company that specializes in the transfer of crude oil and refined petroleum products via water. TNK's fleet includes 47 double-hull tankers (25 Suezmax, 13 Aframax, and nine LR2 product tankers), as well as two chartered-in tankers. TNK tankers are most commonly employed for short- and medium-term fixed-rate time-charter contracts, as well as spot tanker market trading.

Why Should Investors Book Profit?

• Declining Fundamentals: Net revenues fell 38.81% YoY to USD 542.37 million in FY21 (ended December 31, 2021) from USD 886.43 million in FY20. It also reported a net loss of USD 242.37 million in FY21, compared to a net profit of USD 87.32 million in FY20.
• Leveraged Balance Sheet: The company is more exposed to balance sheet risk than its peers, with a Debt/Equity ratio of 0.72x as of September 30, 2021, compared to the industry norm of 0.61x. Furthermore, its long-term debt-to-total-capital ratio was 36.9%, compared to the industry average of 27.9% for the same period. These leveraged financials put the corporation at risk of huge swings due to the slightest adjustment in interest rates.
• Competition Risk: TNK operates in the marine transportation industry. It faces direct competition from large oil companies and independent tanker companies, both of which have more financial and operational resources, putting its economic interests at risk.
• Reliance on Spot Tanker Rates: In FY20 and FY19, TNK earned 74.3% and 86.8% of its net revenues from vessels operating in the spot tanker market, respectively. As a result, any decrease in the spot tanker rate could harm the company's financials.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

TNK's share price has inclined 37.06% in the past three months and is currently leaning towards the higher band of the 52-week range of USD 9.89 to USD 16.09. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 12.73.

Considering the company's industry above leverage, declining fundamentals, current valuation and associated risks. We recommend a "Sell" rating on the stock at the closing price of USD 14.57, up 4.52% as of March 02, 2022.                           

Three-Year Technical Price Chart (as of March 02, 2022). Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.