GasLog Partners remains a potential acquisition target but is benefitting from being one of the few remaining publicly listed LNG carrier owners.

That is the view of US investment bank Jefferies' analyst Randy Giveans, who has upgraded the GasLog spin-off to a "buy", reflecting the ongoing increase in asset values in the sector.

He said the shipowner has fully secured its fleet on time charters for the first quarter of 2022 and has 75% of days locked-in for next year, leaving some operational upside to stronger rates next year.

Giveans described GasLog Partners as "one of the few remaining US-listed pure-play LNG carrier names" and argued that the company should benefit from the much-improved investor sentiment in the sector.

He increased the target price from $5 per unit to $6.50. In New York on Thursday, the stock closed at $4.54.

In recent months, the LNG carrier industry has seen a flurry of deals to take listed companies private.

In the most recent, infrastructure investment firm Stonepeak agreed a $6.2bn deal to acquire Teekay LNG Partners.

Parent has gone private with BlackRock

GasLog itself teamed up with BlackRock's Global Energy & Power Infrastructure earlier this year in a deal in which it delisted from the New York Stock Exchange.

And in March, Norwegian family entity Leif Hoegh & Co unveiled plans to partner with Morgan Stanley Infrastructure Partners to take Oslo-listed Hoegh LNG private.

The GasLog Partners units trade at a 30% discount to net asset value, and Giveans believes the partnership remains a potential acquisition target.

"With a combination of vessels on long-term charters, vessels with spot exposure, no near-term debt maturities, and possible distribution increases in 2022, we believe GLOP [GasLog Partners] will benefit from increased investor interest from those who want exposure to the rapidly improving LNG shipping sector," he said.

The analyst expects more profit from the company in the second half of 2021 and the whole of 2022, as rates are set to rise.

Debt reduction is the target

Jefferies forecasts its spot tri-fuel diesel electric propulsion (TFDE) carriers to earn an average of $75,000 per day in 2022, and the spot steam-turbine vessels to bring in $45,000 per day, with average utilisation rates of 75%.

The company has indicated that its priority is to pay down debt and de-risk the balance sheet in order to reduce break-even rates and position itself for future fleet renewal.

"Given its most recent charters, one of which is index-linked, we believe this provides even further stability and visibility on the partnership's cash flow in the coming quarters, which we expect to be put towards additional debt repayment," Giveans said.

"As such, we expect the partnership to maintain its distribution in the coming quarters as it continues to prioritise balance sheet strength, but increases could come later next year."

LNG carrier spot rates were counter-seasonally strong during the summer and have remained robust into the autumn as summer gas demand meaningfully reduced inventories in Europe and Asia.

This has led to strong demand to restock inventories ahead of the colder winter months, which has boosted rates in recent weeks, Giveans said.

LNG demand to remain in 2021?

Randy Giveans is optimistic about prospects for the LNG carrier sector. Photo: Johnathon Henninger/TradeWinds Events

"We expect demand for LNG will remain high in the coming months, especially if winter weather is colder than expected," the analyst said.

He puts one-year time charter rates for TFDE carriers at $100,000 per day, and spot rates at more than $160,000.

GasLog Partners controls a fleet of 15 LNG carriers, one-third of which are steam-turbine vessels.

In its last results briefing in July, the company spoke about being open to the sale of its steam-turbine vessels but said it intends to pursue fleet renewal through consolidation rather than newbuildings.

Earlier in October, GasLog Partners concluded a $120m sale-and-leaseback deal with China Development Bank Leasing (CDBL) for one of its eight-year-old LNG carriers.

The agreement for the 155,000-cbm, tri-fuel diesel-electric vessel GasLog Shanghai (built 2013) with a wholly owned subsidiary of CDBL will release around $20m of incremental net liquidity to the company.

GasLog Partners will bareboat charter-in the vessel for five years, ending in October 2026.