Cheniere Energy, Inc. (NYSE:LNG) units continue to be one of the biggest laggards of its peer group, according to UBS analysts, who upgraded the stock to ‘Buy’ from ‘Neutral’ with a 12-month target price of $57 per units.
In a note to clients, they view the sentiment surrounding CQP as being at an inflection point as global liquefied natural gas (LNG) improves on fundamentals, the company’s cash volatility decreases as 95% of its LNG output is contracted in 2024, as well as future growth opportunities at the Sabine Pass Expansion project.
“We believe given recent peer transactions have valued strategic/contracted LNG assets at 10.5 to 12 times, compared with about 9.5 times for CQP, stable cash flows (contracted with limited commodity exposure) & future growth at Sabine Pass could imply $16 in upside option value,” the analysts wrote.
They also noted that Sabine Pass growth would support a distribution boost for CQP investors.
Thus, analysts at UBS believe CQP’s current valuation is “an attractive entry point for a potential valuation re-rate”.
Units of Cheniere Energy Partners LP rose 2% to $50.20 in mid-afternoon trading on Wednesday and have gained 12% over the past 52 weeks.
Contact Sean at sean@proactiveinvestors.com