Nakilat is the best avenue for equity investors to participate in the long-term growth in Qatar’s Liquefied Natural Gas (LNG) sector, said the QNB Financial Services (QNBFS) report, yesterday.
“We remain bullish on Nakilat and consider it as the best avenue for equity investors to participate in the long-term growth expected in Qatar’s LNG sector. Since we upgraded the stock to an outperform on November 10, 2020, Qatar Gas Transport Company Ltd (QGTS) share price has appreciated by 17 percent, significantly beating the QE Index’s increase of 6 percent as Nakilat was re-included in the MSCI EM Index,” noted the report.
Irrespective of the volatility of the LNG shipping market, Nakilat’s business should remain relatively unaffected given the long-term nature of its charters, it added.
According to the report, QGTS’ fleet continues to provide the company with stable, contractually sustainable cash flow that allow for a healthy residual income stream for equity investors after providing the debt service.
Moreover, the 40-year life of QGTS’ vessels versus maximum debt life of 25 years (last debt maturing 2033), continues to create refinancing opportunities to increase fleet size. “Thus, we think further deals in LNG ships and floating storage regasification unit’s (FSRU) are likely,” added the report.
In the near-term, addition of four LNG vessels (one added in early January followed by one each in second half of 2021 and in early 2022) via Global Shipping, should help earnings growth in 2021 and 2022, it said.
The report highlighted, in terms of catalysts, we continue to believe expansion of Qatar’s LNG output from 77 MTPA TO 126 MTPA is a significant driver. Currently our model does not assume any fleet growth and we will incorporate such expansion once more details become available.
“We note every vessel (@100 percent) adds roughly 1 percent to QGTS’ target price and we should hear more about carrier selection by end of 2022. We foresee significant upward revision to our estimates and price target once we factor in this expansion,” the report added.
Nakilat’s successful fleet expansion bears strong testament the company’s continued commitment towards maintaining its leadership in energy transportation, while remaining fully compliant with all health and safety guidelines.
Additionally, the Nakilat group continued to strengthen its value proposition, with its ship repair, offshore fabrication, towage, and other maritime services remaining full operational and contributing towards the company’s vision to be a global leader and provider of choice for energy transportation and maritime services, as well as Qatar’s 2030 vision.
