Urs Dur, the director of the Clarkson group’sequity 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 $33.00as shares slipped 2.96% to $29.36.
In a note to clients the Manhattan-basedanalyst said he expects the recent $265m acquisition of the 145,000-cbm LNGcarrier Golar Grand (built 2006) from Golar LNG Ltd to drive distributiongrowth of approximately 10% when the dust settles.
Durs admitted the infrequency of sale-and-purchasetransactions in the LNG space makes it tough to put the purchase price incontext but believes the level was “fair” as the vessel came with a three-year charterat a rate that appears to be above the current market average.
The analyst expects to see similar dealsin the future, which could drive what he described as “significant upside” tohis 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 andOslo-based company were to announce four more dropdowns at some point in the foreseeablefuture, 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 ashigh as 5.7% and the average MLP (master limited partnership) yields [around]6.1%,” he continued.
“As we expect distributions to increase 10% andgiven the growth potential from the GP holder we believe that Golar has greatergrowth 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 discountto our dividend discount model of $43.00.”
