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GasLog Partners: This New Listing Has High Growth Potential

June 03, 2014 | About:
Value Investor

Value Investor

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GasLog Partners (GLOP) is a limited partnership firm which owns, operates and acquires LNG carriers under long-term charter of five years or more. The company has an initial fleet of three LNG carriers with long-term contracts scheduled to expire in 2018 and 2019.

GasLog (GLOG) is the parent company of GasLog Partners. The company is an owner, operator and manager of LNG carriers and works as a part of LNG logistics chain. In April 2012, the company had a fleet of 10 LNG carriers and since then GasLog has increased its capacity by 111% to 21 fully owned ships.

This article discusses the investment positives for the recently listed GasLog Partners. The investment conclusion is that the company is a strong buy for the long term.

Key Investment Positives: Modern Fleet with Visible Growth

GasLog Partners’ initial fleet consists of three LNG carriers with contract expiry in 2018 and 2019. In addition to this, GasLog Partners has the option to purchase 12 LNG carriers over the next three years.

These vessels are expected to be delivered to GasLog by 2016 and have charter duration of 5.5 to 10 years with BG Group and Shell. The current vessels and the new deliveries provide GasLog Partners with sound revenue and cash flow visibility. Further, contract with financially stable companies like BG Group and Shell minimizes GasLog Partners’ counterparty risk.

The advantage with the initial three vessels is that they are young with an average age of less than one year, which happens to be the youngest in the industry. Going forward, GasLog Partners also stands to benefit from the high specification LNG carriers expected to be delivered over the next few years.

Revenue Visibility Provides Financial Stability

The company has an average remaining contracted life of 4.1 years with staggered maturities. This ensures a steady cash flow for the company. This brings me to an important discussion on the company’s revenue growth and shareholder value creation. Considering 363 numbers of days in operation and a day rate of $76,826 for each of the three vessels, the forecasted revenue for fiscal 2014 is $83.7 million.

Value in dollar

No.of days of operation

Dayrate

Revenue

GasLog Shanghai

363

76826

27887838

GasLog Santiago

363

76826

27887838

GasLog Sydney

363

76826

27887838

       

Total

   

83663514

Total in million

   

83.66351

Based on the company’s assumptions on operating expenses and depreciation, the forecasted EBITDA for fiscal 2014 is $59.9 million, a 21% increase over the previous year. An increasing EBITDA provides strong distribution coverage for the investors.

Value in dollar millions

Historical Year Ended December 31, 2013

Forecast Twelve Months Ending March 31, 2015

Revenue

64.1

83.7

Vessel operating costs

-13.1

-18.4

Depreciation

-12.2

-16.1

General and administrative expenses

-1.5

-5.3

Profit from Operations

37.3

43.8

Financial costs including gain/(loss) on interest rate swaps

-11.1

-18.1

Financial income

0

-

Profit Attributable to GasLog Partners LP Owners

26.2

-18.1

     

Adjusted EBITDA Reconciliation

   

Profit Attributable to GLOP LP Owners

26.2

25.7

Financial Income

0

-

Financial costs including gain/(loss) on interest swaps

11.1

18.1

Depreciation

12.2

16.1

Foreign exchange losses

0

-

Adjusted EBITDA

49.6

59.9

The company estimates $33.8 million of available cash for distribution and with distribution unit coverage of 1.125x, GasLog Partners plans to distribute $1.50 annually. At current market price of $28 implied dividend yield of 5.3% is a fairly good return. Also, unit coverage of 1.125x suggests that the company has a cushion of 12.5% of the available cash after paying dividend.

Valuations

In terms of valuation the company is trading at an attractive price and investors can consider this as a good investment point. GasLog Partners has the lowest EV/EBITDA and EV/Revenue compared to peers such as Golar LNG (GLNG) and Teekay LNG Partners (TGP). A low EV/EBITDA and EV/Revenue suggests undervaluation of the company and hence a good value investment.

Parameters

EV/EBITDA

EV/Revenue

GLOP

12.8

9.9

GLNG

NA

51.5

TGP

21.1

14.2

Conclusion

Increased global LNG production with growing demand for LNG ships supports secured cash flow of the company. Also, strong relationship with GasLog enhances operational and financial efficiency of the company. I would strongly recommend this high dividend yield stock with definite growth plans as a BUY for income investors.

About the author:

Value Investor
A value investor.

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