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Analyzer is megabull: – Spot rates will explode



Flex LNG is a LNG ships operated by Fredriksen and has 13 state-of-the-art ships (the oldest ship from 2018).

Five of the thirteen vessels are on the water today, and one is shipped in 2019. The other boats are ready for delivery in 2020 and 2021.

Flex excludes efficient diesel engines on gas, called "two-stroke drive".

For low-speed LNGC ships, MEGI manufactured by Man, or X-DF produced by WinGD, are two real alternative technologies. Flex has boats on request from both manufacturers.

The two-stroke will generate 30% fuel savings on Tri-Fuel Diesel Electric (TFDE), which is an industry standard. Part of the investment case in Flex is only a higher realized rate due to large savings in charter charter.

Towards the end of 2018, the rates rose, but the development was worse by 2019. Joakim Hannisdahl, head of analysis at Cleaves Securities, writes in a 240-page report that can be downloaded here for free.

"After the high season, exchange rates dropped from the highest level in the fourth quarter, but also due to the warm winter in the Far East and the re-launch of nuclear power plants in Japan. We expect that in the second half of the year, the exchange rate will blink to the same level as last year's high. Given the increased shrinkage and the lack of gas condensation capacity in 2021,2022 and 2023, we believe that the fourth quarter of 2020 will be at the top of this wheel. We have a recommendation to buy LNGCs and see a 40% increase in share, "says Hannisdahl.

Although analyst Cleavesa generally estimates that up in the space is 40 percent, there are significantly more bulls on behalf of Flex LNG.

With a target price of NOK 185, growth over the next 12 months will increase by more than 70%. However, the objective of the exchange rate in relation to the extensive report of the previous NOK 219 was reduced. Higher exports from North America and significant demand growth are the main factors that Hannisdahl uses in their estimates.

We believe that the rates will increase considerably over the next few months as several new export capacities are ending. We expect the largest increase in exports from North America, which is traditionally a powerful driver for navigation, is relatively long. Even in the year 2020 we see a significant increase in demand, but we believe that the cyclical peak will be achieved in the same year due to the increasing volume of orders and lower growth in demand in 2021/22, says the analyst at Hegnar.no.

As LNG is much more environmentally friendly than coal and oil, analyst Cleaves thinks that industry has had megatrends in recent years.

– The long-term trend for LNG is strongly focused on the environment and the goals of cleaner air in many urban areas. We have a target price of NOK 185 in Flex LNG and we believe that the share in the coming months will increase with the rate of increase in earnings, says Hannisdahl Hegnar.no.

In addition to John Fredricksen, Skagen Vekst is one of the biggest owners of the company. Bjellesau and the real estate billionaire Runar Vatne are also deeply involved in this case.

Internal downloads

Halfdan Marius Foss, head of shipping and operations, bought Friday's 1,014 shares in Flex LNG at 107 NOK.

Foss therefore invested around NOK 108,500 for shares.

Following the transaction, Foss owns 1,264 shares of Flex LNG and offers a further 45,000 shares.

The Flex share rose 0.56 percent to 108.00 NOK on Friday in the Oslo Stock Exchange.


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