Golar grabs upgrade

Clarkson Capital Markets upgraded shares of John Fredriksen’s Golar LNG Partners Wednesday in anticipation of continued expansion through dropdown deals with it parent.
The Golar Grand is tied to a charter with the BG Group.

The Golar Grand is tied to a charter with the BG Group.

Urs Dur, the director of the Clarkson group’s equity research unit, raised his rating on the Nasdaq-listed shipowner to “outperform” from “market perform” and changed lifted its price target to $36.00 from $33.00 as shares slipped 2.96% to $29.36.

In a note to clients the Manhattan-based analyst said he expects the recent $265m acquisition of the 145,000-cbm LNG carrier Golar Grand (built 2006) from Golar LNG Ltd to drive distribution growth of approximately 10% when the dust settles.

Durs admitted the infrequency of sale-and-purchase transactions in the LNG space makes it tough to put the purchase price in context but believes the level was “fair” as the vessel came with a three-year charter at a rate that appears to be above the current market average.

The analyst expects to see similar deals in the future, which could drive what he described as “significant upside” to his new estimates but noted Golar’s US-listed affiliate doesn’t currently hold anymore “obvious” dropdown candidates so another deal may be unlikely in the near-term.

If, for example, the Hamilton and Oslo-based company were to announce four more dropdowns at some point in the foreseeable future, however, Dur believes this could drive distribution by approximately 33% annually over the next three years.

“Golar has a current yield of 6.3% but has yielded as high as 5.7% and the average MLP (master limited partnership) yields [around] 6.1%,” he continued. 

“As we expect distributions to increase 10% and given the growth potential from the GP holder we believe that Golar has greater growth potential than the average MLP and, as such, a target valuation of 5.8%, a small premium to the peers is warranted and also constitutes a moderate discount to our dividend discount model of $43.00.”

Golar LNG Partners
Last+/- %+/-High
USD----
Profile

John Fredriksen, Frontline, winner TradeWinds Power 2012.

As the clock counted down to the end of 2011, time was running out for John Fredriksen’s flaship company, Frontline.

» More
Related Vessel
Related
  • Golar Grand drops down

    Golar LNG Partners (GMLP) is set to acquire an LNG carrier from fellow John Fredriksen company Golar LNG for $265m.
  • Golar in FLNG drive

    John Fredriksen’s Golar LNG has confirmed industry speculation and revealed a plan to enter the floating LNG space.
  • Golar game changer

    Golar LNG Ltd may be one of the first US-listed LNG carrier owners to enter the floating liquefaction (FLNG) arena, according to Wells Fargo Securities.
  • Four outfits shortlisted for Uruguayan FSRU facility

    Only two existing providers of LNG floating storage and regasification units (FSRUs) appear to have made it onto a shortlist of four parties bidding to provide a maiden import facility for Uruguay.

  • What’s an MLP?

    Most market insiders are familiar with the phrase master limited partnership (MLP) as the label defines some of the most notable names on Wall Street but not all truly understand the inner workings.

User