{"id":66416,"date":"2023-09-28T10:56:45","date_gmt":"2023-09-28T14:56:45","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/flex-lng-is-there-a-better-alternative-currently-apparently-not-nyseflng\/"},"modified":"2023-09-28T10:56:57","modified_gmt":"2023-09-28T14:56:57","slug":"flex-lng-is-there-a-better-alternative-currently-apparently-not-nyseflng","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=66416","title":{"rendered":"FLEX LNG: Is There A Better Alternative Currently? Apparently Not (NYSE:FLNG)"},"content":{"rendered":"
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Front view of a big LNG tanker ship traveling with full speed over the calm, blue ocean. Just like Flex LNG currently.<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Investment thesis<\/h2>\n

Are there viable alternatives to FLEX LNG (NYSE:FLNG<\/span>) in the LGNC owner-operator space for the income-oriented investor? That was the question I set out to answer in this analysis. While other publicly traded LNGC pure plays exist, none can match the contract backlog duration, management experience, strong ownership, fleet composition, and share liquidity of FLNG. It’s fair to say that it behaves like a bond. And it is even domiciled in Bermuda.<\/span><\/p>\n

If you’re willing to trade growth for stability, FLNG may be the option you’re looking for. Its peer, Cool Company, which has existed for more than a year after becoming an independent unit, offers exposure to the spot market in the coming years.<\/p>\n

Introduction<\/h2>\n

I focus on fundamental analysis, the LNG market outlook, and peer review in this article. Peers Cool Company (CLCO), Awilco LNG (OTCPK:AWLNF), and Dynagas LNG Partners (DLNG) have been selected for comparison, as these are (1) similar to Flex LNG in that their main line of business is LNG shipping (LNGC pure plays) and (2) publicly listed companies. I will devote extra attention to Cool Company, as I regard it as Flex’s leading peer due to its size and NYSE listing.<\/p>\n

Some more prominent players are excluded due to being private and not publicly listed (Maran Gas Company, Gaslog, and BW). Nakilat and MISC were excluded due to their extensive product offerings, making them unsuitable for comparison. Hoegh LNG focuses on FSRUs, and Golar LNG focuses on FLNGs, as opposed to LNGCs.<\/p>\n

Company profile<\/h2>\n

Flex LNG has thirteen LNG carriers in its fleet, all using modern MEGI and XDF propulsion systems. It is focused on long-term charter contracts, recently reporting 54 years of fixed backlog, with options possibly extending that to over 80 years. Twelve out of its thirteen vessels have fixed-rate contracts.<\/p>\n

The share<\/h3>\n

Flex LNG is dual-listed on the NYSE (its primary listing) and the Oslo Stock Exchange (secondary listing). It is part of shipping tycoon John Fredriksen’s publicly listed shipping portfolio.<\/p>\n

Its NYSE shares are more liquid (higher trading volumes) than the OSE shares, which is a benefit. This setup and dynamic are comparable to its closest peer, Cool Company.<\/p>\n

Let’s review Flex LNG’s share price development during the last two years and compare it to its peers.<\/p>\n

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\"Share<\/span>
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Share price development, Flex LNG, and peers (Author’s calculations. Share prices rebased (Sept 21, 2021, = 100). Historical prices sourced from Euronext.com)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Flex and Awilco LNG have had similar trajectories, with both shares plateauing during 2023, possibly due to both following a long-term charter strategy, providing earnings visibility. Cool Company’s share price crashed during the fourth quarter of 2022, while Dynagas’s Series A Preferred Units declined by more than 11 percent. As Dynagas’s common units have yet to be eligible for distributions since 2019 due to loan covenants, I’ve looked at its Series A Preferred Units instead.<\/p>\n

Major shareholders<\/h3>\n

Its largest shareholder is Geveran Trading Co. Ltd., an investment vehicle of shipping tycoon John Fredriksen. As of March 10, 2023, Geveran held approximately 44.8% of Flex LNG’s shares, according to its 2022 20F (p. 69).<\/p>\n

Its main peers also have relatively low free floats, as shown below. Eastern Pacific Shipping owns about 58 % of Cool Company, the Wilhelmsen Family about 39 % of Awilco LNG, and the Prokopiou family owns about 42% of Dynagas LNG Partners through Dynagas Holdings.<\/p>\n

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\"Flex<\/span>
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Flex LNG and peers. Market cap and free float (Finbox)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Management<\/h3>\n

Mr. Oystein Kalleklev, CEO of Flex LNG, joined the company in 2017 as CFO. In 2022, he took over the reins of another portfolio company of Mr. Fredriksen’s empire, Avance Gas. In other words, he currently directs both Flex LNG and Avance Gas. Having had significant roles in the Fredriksen system for close to seven years is a testament to his ability to create results in the eyes of Mr. Fredriksen and his representatives.<\/p>\n

As a bonus, Mr. Kalleklev is one of the few C-level executives posting helpful content on LinkedIn regularly. He is worthy of following on there. In addition, he periodically visits the Vonheim podcast, providing LNG market intelligence and displaying his excellent understanding of the business he’s in.<\/p>\n

Fundamentals<\/h2>\n

In this section, we will consider the following ratios:<\/p>\n