T he year 2022 could be a watershed year for Nakilat if it is chosen as one of the shipowners involved in Qatar’s massive LNG expansion programme, QNB Financial Services (QNBFS) has said in a recent report.
The report said, “We remind investors that QatarEnergy is expanding Qatar’s LNG capacity from 77 MTPA to 110 MTPA with the first production in the fourth quarter of 2025 and further to 126 MTPA a couple of years later. To cater to this expansion, back in April/June 2020, QatarEnergy signed major LNG shipbuilding capacity agreements with Chinese and South Korean companies to build 100+ LNG vessels worth more than QR70 billion.
“In the first quarter of 2021, QatarEnergy issued an invitation to tender package to ship owners for the chartering of LNG carriers in relation to this project. QatarEnergy intends to assign selected ship owners from this tender to the shipyards’ construction slots reserved in China and South Korea. Already, QatarEnergy has moved ahead with the construction of ten LNG ships with four in China and six in South Korea. Given typical lead-times for LNG ship construction, we should expect to hear about final ship owner selections by late 2022 or in the first half of 2023.”
Considering Nakilat’s strategic importance and impressive track record in Qatar’s existing LNG shipping value chain, the report said, “We expect Nakilat to be a major beneficiary of this expansion. We also estimate that every incremental vessel adds roughly 1 percent to Nakilat’s target price and an award of 20-30 ships could significantly affect our price target and estimates.”
“We remain bullish on Nakilat and consider it as the best avenue for equity investors to participate in the long term growth expected in Qatar’s LNG sector. Irrespective of the volatility of the LNG shipping market, Nakilat’s business should remain relatively unaffected given the long term nature of its charters. Nakilat’s fleet continues to provide the company with stable, contractually sustainable cash flow that allows for a healthy residual income stream for equity investors after providing for debt service,” it said.
“We project a 4.7 percent EPS growth for 2022 followed by a 2.8 percent increase in 2023. Our 2022 net income forecast of QR1.42bn is driven by higher JV income as 2022 is the first year of near full-year contribution from the 60 percent-owned Global Shipping JV, along with continuing growth from the shipping JVs and the shipyard. We also project moderately lower finance charges despite higher rates as a majority of Nakilat’s debt interest costs are fixed,” it said.