Golar LNG Ltd

Golar LNG Ltd (NASDAQ: GLNG) Golar LNG Limited provides infrastructure for the liquefaction, transportation, and regasification of LNG. It operates through Shipping, FLNG, and Power segments. The company engages in the acquisition, ownership, operation, and chartering of LNG carriers, Floating Liquefaction Natural Gas Vessel (FLNG), and floating storage regasification units (FSRUs), as well as operates external vessels. The company was founded in 1946 and is headquartered in Hamilton, Bermuda

Latest Updates:

• Won the Best ESG Energy Business Strategy by CFI: On January 28, 2022, Capital Finance International (CFI) has awarded its most prestigious Best Energy Business Strategy, North America 2021 award to Golar LNG Limited. Since the company is dealing with energy and transmission, the investors are concerned more about the Environmental Social and Governance norms, keeping the business clean in terms of the environment as well as books of accounts.
• Raising stakes in Cool Company Limited: On January 28, 2022, Cool Company Ltd. raised USD 275 million through private placement, resulting in the equity valuation of USD 400 million, of which 31% stake is owned by Golar. This investment is made by GOLAR to synergize with Cool Company, which is targeting to become a leading player in LNG shipping.

Q3FY21 Results:

• Increase in Operating revenues: The company reported a rise of 12% in operating revenues to USD 106.6 million in 3QFY21 as compared to USD 95.15 million in 3QFY20. The revenues were recorded on the upswing because the shipping fleet was re-contracted at higher rates, as the demand recovered to pre covid 19 levels.
• Fundraising: Seeing an uptick in the demand from everywhere, the company went on a fundraising spree, by initially placing USD 300 million Norwegian Bonds, then later increasing its Credit Facility to USD 200 million from USD 100 million. This signifies the strong plans of the company to meet the rising demand in the near term, and the results will be reflected in the coming quarters. The profitability will be highly dependent on the supply chain disruptions and any fresh lockdowns.

Key Risks:

• Supply chain disruption and Lockdown fears: The various COVID-19 restrictions and lockdown can derail the demand, which can push back the ambitious plans on which the company is working currently. Further, the supply chain bottleneck is also a reason which can disrupt the clearance of the ships from various ports and the long due wait can most probably extend the cash conversion cycle and prevent more bookings from the clients.

Valuation Methodology: Price/Cash Flow Per-share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM 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 stock price rose 6.29% in the past three months, and continuous buying on dips is keeping the stock prices elevated. Surprisingly the most important trend-defining indicator: 50 DMA & 200 DMA, both are supporting the stock price by throwing the stock prices towards North, whenever the stock tries to flirt with the averages. Considering the bottleneck in the supply chain space and convulsive factors related to COVID 19 restrictions or new variant turning up is a slight risk to the stock, but the gloomy days for the stock have passed away to a great extent.

We have valued the stock using the Price/Cash Flow per share based on relative valuation methodology and arrived at a target price of USD 14.88. The current price of USD 13.85 is indicating that there is still more juice left in the trade.

Considering the movement in stock price, rising revenues, an upswing in the demand of LNG, and the supportive valuations, gives the stock a decent place to be kept in the portfolio. Hence, we recommend a "Hold" rating on the stock at the price of USD 13.85, down by 1.70% as of January 28, 2022, at 01:55 PM ET.

1-Year Technical Price Chart (as on January 28, 2022, at 01:55 PM ET). Source: REFINITIV, Analysis by Kalkine Group

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.