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)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

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.

AFC Gamma, Inc.

AFCG Details

AFC Gamma, Inc. (NASDAQ: AFCG) is a commercial real estate finance company. The company operates as one operating segment and is primarily focused on financing senior secured loans and other types of loans for established cannabis industry operators in states where medical and /or adult-use cannabis is legal.  These loans are secured, directly or indirectly, by real estate, equipment, licenses, and/or other assets of borrowers depending on the applicable laws and regulations governing such borrowers. AFCG was listed on the NASDAQ on March 19, 2021. As of June 02, 2021, the company’s market capitalization stood at USD 315.86 million.

USD 22.0 Million Credit Facility to Justice Cannabis Co.: On May 06, 2021, the company announced that the provision of a USD 22.0 million senior secured credit facility to Justice Cannabis Co., to fund the expansion of its 72,000 sq. ft cultivation and processing facility and the buildout of a dispensary in Ewing, New Jersey. The loan is secured by first-lien mortgages on Justice Cannabis’ wholly-owned real estate properties in New Jersey and other commercial-security interests. New Jersey legalized the use of medical marijuana in 2010 and adult-use marijuana in 2021.

Initial Public Offering: On March 18, 2021, the company announced the pricing of its initial public offering (IPO) of 6.25 million shares of its common stock at an offer price of USD 19.00 per share. The issue closed on March 19, 2021, including an over-allotment, resulting in the issuance of around 7.19 million shares, for aggregate net proceeds of USD 123.84 million.

Q1FY21 Results: The company reported a total revenue (interest income) of USD 4.69 million in Q1FY21 (ending March 31, 2021). Net income for Q1FY21 was USD 1.4 million. Total expenses for Q1FY21 were USD 3.07 million, including USD 1.6 million of one-time non-cash stock compensation expenses. Total loan commitments as of March 31, 2021 were USD 130.7 million, of which USD 97.2 million were funded, across 8 portfolio companies.

AFCG Deal Pipeline (Source: Q1FY21 Earnings Presentation, May 2021)

Key Risks: The company was formed on July 06, 2020 and has a limited operating history. As a result, it is subject to business risks and uncertainties associated with any new business, including that it may not be able to operate successfully or profitably. In addition, AFCG’s portfolio of loans is concentrated in certain property types or in particular industries, such as cannabis, that are subject to a higher risk of foreclosure, and are secured by properties concentrated in a limited number of geographic locations. The economic and business downturns relating to such region or type of asset may result in defaults on loans within a short period, affecting the company’s business, financial condition, and operating results.

Outlook: The company expects to pay out between 75% to 90% of the distributable earnings in Q2FY21.

Q2FY21 Distributable Earnings (Source: Q1FY21 Earnings Presentation, May 2021)

AFCG Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: AFCG’s share price decreased by 8.74% in the past one month and is currently trading at 127.63% of its original issue price. Considering the attractive valuation of the newly listed company, strong financial performance, recent portfolio geographical diversification with investments in 3 new states, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 24.25, up by 2.62% as of June 02, 2021. The target price of USD 27.94 represents a Price/Earnings multiple of 14.68x on FY21E earnings per share of USD 1.90. On the technical chart, the next support level is USD 21.37.

* 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.