Shares in Liquefied Natural Gas Ltd (ASX: LNG) hit a new all-time high of $2.65 today bringing the total return for the year to an incredible 783%, rising from a low of 30 cents.
What do they do?
The Perth-based company specialises in gas processing, with the aim of bringing mid-scale liquefied natural gas projects to the international energy market. The company claims to have plant efficiency 30% higher and capital costs 50% lower than competitors.
It employs a relatively simple tolling model, by processing a customer’s gas and charging for the liquefaction process.
Upcoming catalysts for further upside:
Broker D J Carmichael believes there are plenty of near-term catalysts for further upside including:
- More binding tolling agreements by year’s end.
- Engineering, procurement and construction updates by the end of July.
- August environmental impact statements.
- US hedge funds see an Australian company operating on lower earnings multiples than similar entities overseas.
- By 2018, LNG will have an operational LNG export plant at its Magnolia LNG Project in Louisiana, USA.
- Assuming success at Magnolia, the LNG technology would be of significant value alone.
Who is driving the share price up?
Large US hedge funds see the business model as being similar to the US stock Cheniere Energy, Inc. (NYSEMKT: LNG), which is on a far greater forward earnings multiple. To show how the business model should work, this year Woodside Petroleum Limited’s (ASX: WPL) bought low-cost US gas from Cheniere Energy and took advantage of the price differential by selling into the Asian oil-linked markets.
Motley Fool contributor Mark Woodruff does not own shares in any of the companies mentioned in this article
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