We have been very bullish on Cool since the war started, I wrote here several times about the company. Thesis is simple. Europe is braking relience on Russian gas and will need to get gas from more remote places. By LNG tankers. Cool company should be one of the beneficients. Spot rates are booming, Cool stock has not move, yet. It is a newly listed stock. Dual listing in the US announced for H2.
ABG Sundal Collier published very bullish report. Front page summary below:
|Cool Company Ltd|
|BUY, COOL.OL: SP, NOK 82.76; TP, NOK 179.00 (154.00)|
|Best exposure to appreciating LNG spot rates|
|Recent weakness in spot rates carry little impactABGSC slightly below cons for Q2’22e, above for ’23-24eTP up to NOK 179 (154) on a stronger USD|
|Recent weakness in spot rates carry little impact |
The Freeport incident on 8 June, and the following loss of LNG cargoes, has lowered spot rates for 160k TFDE ships such as those owned by Cool Company, but we also note that the 174k MEGI spot rates have increased for two consecutive weeks now. However, declines in spot rates in recent weeks should have a minimal impact for Cool Company given its extensive contract coverage for this year. As we adjust the 1-year TC contract fixed at USD 120,000/day earlier this year to start in May (previously assumed to start in June), we increase our Q2’22 EBITDA by USD 1m, to USD 33m. We have also added a dividend payout already from the coming quarter of USD 0.1/sh based on a cautious 25% pay-out ratio.
ABGSC slightly below cons. for Q2’22e, above for ’23-24e
Although we add USD 1m to our Q2’22e EBITDA, we are still 4% below FactSet consensus, while our market rate assumptions for H2 are above consensus and for the full year our USD 151m EBITDA is 12% above consensus. For ‘23e and ‘24e our EBITDA is USD 256m and USD 274m, respectively, reflecting our positive stance on the continued strength in the LNG shipping market, with average spot rates above USD100,000/day in both years, and we are 81% and 137% above consensus, respectively.
TP up to NOK 179 on a stronger USD
The continued appreciation of the USD/NOK adds NOK 28/sh to our 1y fwd. NAV of NOK 199/sh, to which we apply a 10% discount to arrive at our target price of NOK 179/sh, up from NOK 154/sh. We estimate a current P/NAV of 0.77x and regard Cool Company the most attractive exposure to what we continue to believe will be a very interesting LNG shipping market in the years to come. We reiterate BUY.
Do read our previous blog post on Mintra, one of the beneficiaries of the shipping boom. Very interesting company
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