Golar LNG's move to seek a New York initial public offering for its Golar Power joint venture could unlock value of nearly $7 per share for current holders, a top analyst told clients on Wednesday.
New York-based researcher Michael Webber reiterated a "buy" rating on Golar LNG stock and cited an $18 figure for both its net asset value and its price target.
The stock was trading at just over $10 on the Nasdaq on Wednesday afternoon even after gaining 11% on Monday on the IPO announcement, highlighting the potential upside, Webber said in a client note.
"We believe spinning off Golar Power [Hygo] is a significant step toward simplifying Golar’s business, eventually creating a cleaner and more direct focus on frontier state energy transition — markets that are positively levered to cheaper commodity prices," Webber said.
"While the spin has been anticipated for a couple years now, the drumbeat has grown louder, particularly as downstream valuations have improved ... potentially unlocking significant value for GLNG [Golar LNG] shareholders."
Webber noted that the closest comparable public company to the new Hygo Energy Transition is New Fortress Energy, which trades at more than 13 times its projected 2021 Ebitda.
While Webber estimated a benefit of $6.75 per share for current Golar LNG holders, he added that "continued downstream development and the commercialisation of merchant volumes from Sergipe and other terminals could also drive that figure significantly higher".
Webber is at least the second analyst to weigh in on the potential benefit to Golar LNG holders, after Fearnley Securities estimated the added valuation could reach $7 to $8, or 70% of Golar LNG's market capitalisation.
While Webber, founder of Webber Research & Advisory, remains bullish on Golar LNG, he remains sceptical on the affiliated vessel owner, Golar LNG Partners, maintaining a $3 price target and a "sell" rating.
"We do believe there could be a few more opportunities for some of GMLP’s assets as Hygo gradually expands its footprint, but we wouldn’t consider those material enough [today] to change our thesis on GMLP in any way," Webber wrote, referring to Golar LNG Partners by its ticker symbol.
Hygo will attempt to list on the Nasdaq. The preliminary prospectus indicates the company is seeking $100m, although it is unclear whether this is simply a placeholder figure subject to amendment.
Fearnley is pegging the "appropriate" IPO range at between $250 and $500m.
