Golar Energy Limited

GLNG Details

Golar LNG Limited (NASDAQ: GLNG) offers infrastructure for the liquefaction, transportation, and regasification of LNG. The company is engaged in the acquisition, ownership, operation, and chartering of LNG carriers, Floating Liquefaction Natural Gas (FLNG) vessels, Floating Storage Regasification Units (FSRUs), and other external vessels, and operates through Shipping, FLNG, and Power segments. As of March 31, 2021, GLNG's fleet comprises nine LNG carriers, one FSRU, and three FLNGs. As of June 02, 2021, the company’s market capitalization stood at USD 1.43 billion.

Sale of Hygo Energy Transition and Golar LNG Partners: On April 15, 2021, the company, along with a fund managed by Stonepeak Infrastructure Partners, closed the sale of 100% of Hygo Energy Transition Ltd. to New Fortress Energy Inc. (NFE), in a cash and stock transaction, valued at USD 3.1 billion on an enterprise value basis (USD 2.18 billion equity value). In addition, the company also closed the sale of 100% of Golar LNG Partners LP (GMLP) to NFE, in an all-cash transaction valued at USD 1.9 billion on an enterprise value basis (USD 251.0 million equity value). GLNG previously held a 32% interest in GMLP.  As a result of the sale, GLNG has become a major shareholder of NFE.

Q1FY21 Results: The company reported a slight increase of 2.67% in total revenue to USD 125.83 million in Q1FY21 (ending March 31, 2021) compared to USD 122.56 million in Q1FY20. Revenue from the Shipping segment represented 49.97% of total revenue in Q1FY21. The net income for Q1FY21 was USD 63.10 million, compared to a net loss of USD 91.25 million in Q1FY20.

Key Risks: Given the sophisticated nature, the highly technical work related to FLNG conversions can only be performed by a limited number of contractors with relevant experience. As a result, a change of contractors for any reason could result in higher costs and delays to the company’s delivery schedules. In addition, due to the locations in which GLNG operates (e.g., Cameroon), a number of its current and potential future projects are subject to higher political and security risks than operations in other areas of the world. Further, the company has high leverage (Debt to Equity ratio of 1.8x as of Q1FY21), but an interest coverage of 2.75x over the LTM period indicates its ability to service its debt obligations.

GLNG FY21 Focus Areas (Source: Q1FY21 Results Presentation, May 2021)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

GLNG Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: GLNG increased by 21.17% and 39.20% in the past 3 and 6 months, respectively, and is currently leaning towards the higher end of the 52-week range of USD 5.67 to USD 15.12. The stock is currently trading above its 200 DMA levels. On the technical chart, the next support level is USD 11.60. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 15.02. Considering the recent sale of downstream business and related acquisition of a major shareholding in NFE, decent financials, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 13.05, down by 1.21% as of June 02, 2021.

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

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

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