The widespread sanctions being applied to Russia will have a lasting impact on a number of industries, notes Bryan Perry, growth and income expert and editor of Cash Machine.
One of the larger secular themes that is playing out is the rising global demand for liquified natural gas (LNG) to replace coal and to also replace Russian-imported LNG in Europe. In 2021, 40% of natural gas consumed in the European Union (EU) came from Russia. This is a staggering statistic.
With the U.S. LNG production near capacity, it will keep prices elevated as the supply/demand equation heavily favors producers and shippers of LNG to foreign buyers — hence, the basis for this month’s new recommendation.
Flex LNG Ltd. (FLNG) is a pure play on the ocean-going transport of LNG from the United States and other LNG-producing terminals around the world to end markets.
Based in Bermuda under Norwegian management, Flex LNG Ltd. is an LNG shipping company with a fleet of thirteen fuel-efficient, fifth-generation LNG carriers. The fleet consists of nine M-type, Electronically Controlled, Gas Injection LNG carriers and four Generation X Dual Fuel LNG carriers built between 2018 and 2021. This is a very young fleet by industry standards.
Shares of FLNG traded to an all-time high on headlines that industry-leading Cheniere Energy (LNG) had exercised its option to employ a fifth Flex LNG carrier under the time charter agreements announced nearly a year ago. The Flex Aurora will be the fifth ship to be delivered to Cheniere, commencing its three-and-a-half-year time charter during Q3.
Flex LNG just recently reported third-quarter results that beat consensus estimates while also guiding for above-consensus estimates in the current quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose sequentially to $70.9 million from $66.1 million. Non-generally accepted accounting principles (GAAP) earnings per share (EPS) of $0.79 beat consensus by $0.04.
The LNG shipping company reported that the "boom” in the freight market has affected both short-and-long term rates positively The company’s Q4 2022 revenue is forecast to reach $95-98 million, narrowed down from its prior guidance range of $90-100 million. That compares with a consensus of $94.41 million.
The company expects a minimum $300 million cash release from balance sheet optimization. Flex LNG, further, confirmed the 100% contract coverage for 2023 and minimum 91% coverage for 2024.
Flex management declared a $0.75 per share dividend that equates to $3.00/per share per year. The ex-dividend date is set for Nov. 30. At its current price, the stock yields 9.12%, making it an excellent addition to our Extreme Income Portfolio and a strong complement to our high-yield, inflation-sensitive asset mix.
Let’s set sail with this pure play in the LNG space and look for rising dividend payouts and capital appreciation. Buy Flex LNG Ltd. under $34.
