Promise of a strong second half for the LNG market has led Stifel to upgrade its rating on Peter Livanos company GasLog.
While analyst Ben Nolan ratcheted up his view on the New York-listed shipowner, he simultaneously downgraded MLP GasLog Partners amid charter renewal risk for older tonnage.
Nolan has placed a buy rating on GasLog noting the spot market is set to turn upwards in the second six months of 2019 at a time the stock has fallen to “attractive levels”.
“Shares have fallen to levels not seen since May 2017, and while we remain concerned longer-term about the potential for over ordering of LNG carriers, we do believe the remainder of 2019 and 2020 should be solid including a strong near-term recovery in spot rates,” Nolan wrote.
“With seven vessels in the spot market, we expect as spot rates rise, GasLog earnings and cash flows should also raise improvement market sentiment.”
Nolan said this month was the time to invest in the stock.
“LNG shipping vessels are earning less than $50,000 per day in the spot market, but the forward curve is predicting December spot prices of greater than $100,000 per day,” he said.
“Seasonally LNG demand improves in the back half of the year, voyages lengthen, vessels are used for floating storage, and generally, it is easier to make money.”
Yesterday GasLog took a larger stake in GasLog Partners as part of a deal which saw it cut rights for incentive distributions from the spin-off.
Nolan responded by dropping GasLog Partners to hold.
“While the units trade at a covered ~10% yield, we believe yield compression could be challenging given some re-contracting exposure on older steam-powered ships,” he said.
