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Tuesday, 07/07/2015 8:27:24 PM

Tuesday, July 07, 2015 8:27:24 PM

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Citi: Cheniere Energy LP, LLC Are Buys

In a report published Monday, Citi analyst Faisel Khan resumed coverage of Cheniere Energy, Inc. (NYSE: LNG) with a Neutral rating and a price target of $72 . The analyst maintained Buy ratings on both Cheniere Energy Partners LP (NYSE: CQP) and Cheniere Energy Partners LP Holdings LLC (NYSE: CQH).

The price targets for CQP and CQH were reduced from $42 to $40 and from $30 to $28 , respectively, to reflect lower spot LNG pricing and "the uncertainty associated with Cheniere's ability to capture new long-term supply contracts in the current market environment."

Analyst Faisel Khan believes there is "low likelihood" of new long-term contracts for liquefaction capacity out of North America in the next 12 months. "We believe there will be an excess supply relative to demand of ~25mt in 2018…We are cutting our forecast for spot/short-term sales of LNG to a 10% slope to Brent through 2020."

The price target for CQP has been reduced to reflect the deferral of Train 6 at Sabine. "We continue to believe unit holders in CQP have one of the best equity investments in global LNG. Unit holders have a first call on the equity cash flows from Sabine Pass , which we believe is the best positioned global LNG export terminal in the world," Khan wrote.

Khan expects CQH to "eventually trade" at a similar value as CQP, with the only difference being "the dividend tax leakage to CQH." The tax leakage to the dividend is currently estimated at 15 percent and a liquidity discount of 15 percent. "Over time, we believe this liquidity discount will disappear," the report added.

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