Fearnley Securities has given enthusiastic backing to Golar LNG's new IPO for Hygo Energy Transition - and couldn't resist reaching for musical comparisons.
The Brazilian energy specialist was formerly known as Golar Power and is a 50-50 joint venture with Stonepeak Infrastructure Partners.
The investment bank said the new brand is a "rock star name for a rock star company", because - "at least to Norwegian ears" - it calls to mind the young DJ Hygo, analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart said.
But musical associations aside, the company's projects in Sergipe, Barcarena, Santa Catarina and Suape will generate in excess of $300m per year by 2025, Fearnley estimates.
"It is really the downstream business that functions as the icing on the cake here, with the potential for high (and fast) equity returns on small investments utilising spare capacity on terminals/ PPs and distribution hubs," it added.
Hygo will list on the Nasdaq in the US.
The preliminary prospectus indicates the company is seeking $100m, although it is unclear whether this is simply a placeholder figure subject to amendment.
IPO could hit $500m
Fearnley is pegging the "appropriate" IPO range at between $250 and $500m.
The investment bank said part of the proceeds will be used to repay Stonepeak’s $180m worth of preferred shares.
"With the successful start-up of Sergipe Power in March, Hygo is now a self-financed vehicle that should carry an equity value of $1.4bn-$1.5bn at least," the analysts said.
"We can certainly see why GLNG ended up 11% [on Monday] considering that this valuation would imply $7-$8 per share of value net to Golar, or more than 70% of current market capitalisation."
Fearnley has reiterated its buy on the company.
Hygo is to be headed by Eduardo Antonello, 44, who has been chief executive officer since May 2016.
Hygo owns and operates integrated LNG-based transportation, downstream solutions and associated terminal and power generation infrastructure.
Golar said in its interim earnings statement and call earlier this month that it had made progress with its long-running plans to spin off its different business units.
