GOLAR LNG Expect more upbeat management
GOLAR LNG Expect more upbeat management We expect management to be more upbeat at the Q3 earnings call, with LNG spot rates at USD70k/day and FLNG Hilli having successfully arrived in Cameroon. We are 17% above consensus net profit ahead of Q3 results due 30 November. Investor feedback indicates a crowded entry point into the stock in Q1 2018 once the technology has been proven, as we expect multiple FIDs into H1 with a wide-open natural gas arbitrage, and the stock is already on an upward trend on the back of LNG spot rates surprising the market on the upside. We reiterate our BUY recommendation and USD33 target price.
We have raised 2017e net profit by 9% due to a stronger LNGC shipping market towards year-end, while our 2018–2019 forecasts are broadly unchanged. We are 1% below consensus EBITDA for 2017e, and 14% below for both 2018e and 2019e. Above consensus net profit for Q3. Golar LNG is scheduled to report its Q3 results on Thursday 30 November at 13:00 CET and we forecast: EBITDA of USD-5.9m, 33% below consensus of USD-4.4m; pre-tax profit of USD-41.8m, 2% below consensus at USD-41.1m; and net profit of USD-31.8m, 17% above consensus at USD-38.1m. Potential share price catalysts include: 1) a results update on first gas from the Kribi field into the FLNG Hilli expected towards year-end or early January; 2) acceptance of FLNG Hilli expected towards end-Q1 2018; 3) with Asian gas prices at USD9.5mnBtu, vessel utilisation for FLNG Hilli is likely to rise from 50% to 100% by Q2 2018, boosting EBITDA; 4) Fortuna FLNG no.2 with Ophir FID expected Q1 2018 once financing is concluded (we argue positive results from FLNG Hilli are key to Fortuna’s success); 5) further news on Golar LNG’s planned FLNG units in the US, which we believe would derisk the investment case; and 6) an update on Golar Power’s Sergipe power plant. BUY recommendation and target price of USD33 reiterated based on our 1-year forward SOTP of USD33/share; this is cUSD14/share above our current USD18.6/share SOTP (USD6.9 from FLNG Hilli vessel utilisation, rising to 100% from the current 50%, USD8.9 from a 10-year contract for a FLNG unit, and USD1.0 from a 1-year forward lower valuation in LNG shipping).
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We have raised 2017e net profit by 9% due to a stronger LNGC shipping market towards year-end, while our 2018–2019 forecasts are broadly unchanged. We are 1% below consensus EBITDA for 2017e, and 14% below for both 2018e and 2019e. Above consensus net profit for Q3. Golar LNG is scheduled to report its Q3 results on Thursday 30 November at 13:00 CET and we forecast: EBITDA of USD-5.9m, 33% below consensus of USD-4.4m; pre-tax profit of USD-41.8m, 2% below consensus at USD-41.1m; and net profit of USD-31.8m, 17% above consensus at USD-38.1m. Potential share price catalysts include: 1) a results update on first gas from the Kribi field into the FLNG Hilli expected towards year-end or early January; 2) acceptance of FLNG Hilli expected towards end-Q1 2018; 3) with Asian gas prices at USD9.5mnBtu, vessel utilisation for FLNG Hilli is likely to rise from 50% to 100% by Q2 2018, boosting EBITDA; 4) Fortuna FLNG no.2 with Ophir FID expected Q1 2018 once financing is concluded (we argue positive results from FLNG Hilli are key to Fortuna’s success); 5) further news on Golar LNG’s planned FLNG units in the US, which we believe would derisk the investment case; and 6) an update on Golar Power’s Sergipe power plant. BUY recommendation and target price of USD33 reiterated based on our 1-year forward SOTP of USD33/share; this is cUSD14/share above our current USD18.6/share SOTP (USD6.9 from FLNG Hilli vessel utilisation, rising to 100% from the current 50%, USD8.9 from a 10-year contract for a FLNG unit, and USD1.0 from a 1-year forward lower valuation in LNG shipping).
EQUITY