EDISON EQUITY RESEARCH: LIQUEFIED NATURAL GAS LTD - ASSETS AND LONG-TERM GROWTH


Liquefied Natural Gas Ltd (LNGL) has two LNG liquefaction projects in development with planned start-ups in 2018/19. The company is using its own patent protected technology (OSMR®), which should lead to lower capex and opex costs. Lump sum turn-key contracts are being finalized, while tolling fees arrangements mean that cash flows from the projects are predictable (and material). Despite the significant share price rise in the last 18 months, our modelling indicates that there is significant value accretion available for investors. Our risked DCF approach implies a value of A$3.7/share (US$10.9/ADR), but a NAV over time reveals that this could increase to over A$9/share (US$27/ADR) in 2019.

Liquefied Natural Gas Ltd is an ASX-listed company devoted to the development of two LNG export terminals (in US and Canada) with total capacity of 16mtpa, which are planned to reach financial close in 2016 and start production in 2018/19.

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