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Liquefied Natural Gas Limited: A 2,000% return with more upside?

The upward march of shares in Liquefied Natural Gas Limited (ASX: LNG) continued unabated today. The stock resumed trading after a $38.6 million capital raising at $2.60. Despite the last traded price being $3.25, the price rose over 20% to $3.94 in morning trade and is currently trading at $3.76. From a 52-week low of 17.5 cents this represents an annual return in excess of 2,000%.

Why were the funds raised?

The funds will primarily be used for the acquisition and funding of the development of the Bear Head LNG Project, located in Nova Scotia, Canada. The company plans to transform Bear Head into a 4 million tonne per annum (MTPA) LNG export facility with potential for future expansion. To that end, the company has already been in discussions with gas transmission companies to transport natural gas to Bear Head and the project has excellent LNG export opportunities to European markets.

What’s special about Liquefied Natural Gas Ltd?

The Perth-based gas processing company uses valuable technology (Optimised Single Mixed Refrigerant (OSMR)), which is a mid-scale LNG business model. Relative to larger traditional LNG projects, the business model plans to deliver:

1. Lower capital operating costs.

2. Faster construction and development.

3. Improved energy efficiency.

Now What:

In a recent article I gave six reasons why there is further upside for the share price. The two dominant reasons are that U.S. hedge funds see an Australian company operating on lower earnings multiples than similar entities overseas and ownership of the valuable (OSMR) technology.

In today’s announcement, Managing Director Maurice Brand thanked the existing U.S. and Australasian institutional investors for taking up the placement and “showing support of the company’s strategy of developing a pipeline of opportunities by selectively securing sites that meet our criteria and growing the company’s strong presence in North America.

In my opinion there is further upside, as the company’s technology is of significant value when applied to projects owned by other companies.

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Motley Fool contributor Mark Woodruff does not own shares in any of the companies mentioned in this article.

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