New LNG vessels set to drive Nakilat’s earnings growth in 2022: QNBFS

The addition of four new LNG vessels via Global Shipping to Nakilat’s fleet should help earnings growth for the company in 2022, QNB Financial Services (QNBFS) has said in a company report released on Tuesday.
“We remain bullish on Nakilat and consider it as the best avenue for equity investors to participate in the LT 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,” QNBFS said in the report.
Moreover, the report said, the 40-year life of Nakilat’s vessels against maximum debt life of 25 years with the last debt maturing in 2033 continues to create refinancing opportunities to increase fleet size. “Thus, we think further deals in LNG ships and FSRUs are likely,” it said.
In terms of catalysts, QNBFS said, “We continue to believe the expansion of Qatar’s LNG output from 77 MTPA to 126 MTPA is a significant driver. Currently, our model does not assume any fleet growth and we will incorporate such expansion once more details become available. We note every vessel adds roughly 1 percent to Nakilat’s target price (TP) and we should hear more about carrier selection by end of 2022. We foresee significant upward revision to our estimates and price target once we factor in this expansion. We continue to rate Nakilat as outperform and could possibly revise our price target of QR3.5 per share.”
Commenting on Nakilat’s financial results released recently, the report said, “Nakilat posts in-line financial results for 2021. The company’s net income of QR350.5 million in the fourth quarter of 2021 shows a rise of 34.4 percent YoY and is in line with our estimate of QR344.4 million. Revenue from wholly-owned ships of QR905.4 million, the rise of 2.2 percent YoY and 2 percent QoQ, was in-line with our estimate of QR886.6 million. Adjusted revenue of QR1.07 billion, the rise of 12.5 percent YoY and 2.9 percent QoQ, was also in-line-to-moderately above with our estimate of QR1.02 billion and was driven by the strength in JV income and an uptick in wholly-owned ship revenue.”
“EBITDA of QR690.2 million was barely 0.3 percent behind our forecast of QR692.4 million given the modest deterioration of cash gross margins. EBITDA performance was aided by marine and agency services but was offset by G&A expenses of QR25.4 million ahead of our estimate of QR22.6 million. Adjusted EBITDA of QR838.8 million, the rise of 12.5 percent YoY, was 3.1 percent above our estimate of QR813.4 million. The JV income of QR148.6 million, a rise of 166 percent YoY and 7.3 percent QoQ was 22.8 percent above our estimate of QR121.1 million. We note that JV income was depressed in the fourth quarter of 2020 due to weak shipyard performance and a one-time write-down of legacy costs. Finally, finance costs came in at QR258.9 million and were in line with our estimate of QR259.8 million,” it said.
“The 2021 profitability jumped 16.7 percent with record-high EPS of QR0.24 and DPS of QR0.12. These were in line with our model. The 2021 earnings were bang in-line with our estimate. Overall, we find these results encouraging and consistent with the overall progress we see Nakilat making on the operational costs front,” it said.