GLNG - Golar LNG: Bet On Rising Floating LNG Demand

2024-02-21 08:19:02 ET

Summary

• Golar LNG is the sole provider of floating LNG as a service. The company owns two FLNGs, Gimi and Hilli, plus two LNG carriers, Fuji and Arctic.
• The FLNG market is expected to see significant capacity growth, particularly in Africa and North America.
• Golar LNG has a healthy balance sheet, strong liquidity position, and potential for growth, making it an attractive investment opportunity.
• The commissioning of Gimi will increase the total capacity by 112%. If the operating expenses per ton remain the same, doubling the capacity will double GLNG’s operating income.
• GLNG stock trades at 117% P/NAV, 11.48 EV/Sales, 33 EV/EBITDA. Looking at those valuations, the company seems overvalued. However, once we consider GLNG growth potential, the current stock price may look like a fair deal.

Introduction

Golar LNG ( GLNG ) is a truly curious investment idea. The company operates in one of the most niche markets in the shipping industry, floating LNG. It is the sole provider globally offering FLNG as a service. The company owns two FLNGs, Gimi and Hilli, plus two LNG carriers, Fuji and Arctic. The combined capacity of Gimi and Hilli is 5.1 mtpa. Fuji is planned to be converted into FLNG with 3.5 mtpa, while Artic is into FLNG or FSRU (Floating Storage Regasification Unit).

GLNG has a healthy balance sheet with $729 million cash, 44.5% Total Debt/Equity, and 34% Total Liabilities/Total Assets. The company pays dividends with a 3.53% TTM yield. GLNG initiated a $150 million share buyback program, too. GLNG trades at 117% P/NAV, 11.48 EV/Sales, 33 EV/EBITDA, and 1.04 Price/Book. Looking at those valuations, the company seems overvalued. However, once we consider GLNG growth potential, the current stock price may look like a fair deal....

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