Eastern Pacific Shipping-led Cool Company (CoolCo) should be able to make the most of two open vessels in the fourth quarter, analysts believe.
Fearnley Securities said in a note to clients that the LNG carrier owner is a “compelling” investment case due to the prospects for the sector over the long term.
“There are few shipping shares with as many short-term equity triggers,” said analysts Oystein Vaagen and Erik Gabriel Hovi.
The Golar LNG spin-off has two open positions in the fourth quarter and Fearnleys estimates current one-year time charter rates at $130,000 per day, above its previous forecast of $100,000.
While spot rates have been depressed of late due to the Freeport outage in the US, numbers are improving as the market heads into a seasonally strong period, the analysts added.
“Our assumption of $100,000 per day for the two open vessels screens increasingly likely (if not higher),” they said.
Fearnleys also sees liquidity in the share as set to increase through a planned dual listing to complement its Oslo float.
The investment bank also believes a potential increase in the fleet is on the cards due to possible drop-downs of vessels from Eastern Pacific.
This would “showcase COOL’s earnings power and growth platform,” Vaagen and Hovi said.
Fearnleys has a buy rating on the stock.
Big earnings coming
Based on day rates in the $70,000 to $130,000 range for CoolCo’s spot positions in 2023, the analysts are forecasting Ebitda of between $160m and $209m next year.
“However, adding four potential Eastern Pacific vessels on top at acquisition cost, this increases to $230m to $270m,” they said.
“While short-term downside pressure on the LNG shipping distances persist, the long-term picture suggest a tighter market,” the analysts argue.
This is driven by high European/Asia gas demand, project investment decisions and fleet replacement, as well as speed reductions as a result of environmental regulations.
In May, CoolCo said it was starting to look at opportunities to grow its fleet after putting a management team in place.
CoolCo interim chief executive Karl Fredrik Staubo was asked on a conference call about the four former Sovcomflot-controlled LNG carriers EPS interests had recently acquired in a bank sale.
Staubo described them as “highly attractive LNG carriers” with existing charters.
He said there were currently no agreements on those vessels between EPS and CoolCo beyond their technical management. But he said over time those are ships the company would consider to grow its fleet.
