Höegh LNG Partners LP – Value Analysis (NYSE:HMLP) : November 3, 2017

Capitalcube gives Höegh LNG Partners LP a score of 72.

Our analysis is based on comparing Höegh LNG Partners LP with the following peers – Genco Shipping & Trading Ltd, Ultrapetrol (Bahamas) Limited, Dynagas LNG Partners LP and Tsakos Energy Navigation Limited (GNK-US, ULTRF-US, DLNG-US and TNP-US).

Investment Outlook

Höegh LNG Partners LP has a fundamental score of 72 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance last month is down from a median performance last year.
  • It currently trades at a Price/Book ratio of (0.80).
  • We classify HMLP-US as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • HMLP-US has relatively high profit margins while operating with median asset turns.
  • Change in the company’s annual revenues seems to be coming at the expense of earnings.
  • HMLP-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While HMLP-US‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • HMLP-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

HMLP-US is debt-constrained.

  • With debt at a relatively high 42.03% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 91.46%), and interest coverage level of 2.52x, HMLP-US seems debt-constrained.
  • All 4 peers for the company have an outstanding debt balance.

HMLP-US has maintained its relatively high leverage profile from the recent year-end.

  • HMLP-US‘s interest coverage is its highest relative to the last five years and compares to a low of -0.54x in 2012.
  • Compared to 2016, interest coverage has remained relatively stable for both the company (2.52x) and the peer median (1.71x).
  • Interest coverage rose 0.74 points relative to peers. It is also above the 2.50x coverage benchmark unlike the peer median.
  • HMLP-US‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 38.09%.
  • The increase in its debt-EV to 42.03% from 38.57% (in 2016) was also accompanied by an increase in its peer median during this period to 91.46% from 89.20%.
  • Relative to peers, debt-EV rose 1.21 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Genco Shipping & Trading Ltd 93.9 5.23 -1.62 -8.94
Ultrapetrol (Bahamas) Limited 102.22 0.26 -0.11 0.07
Dynagas LNG Partners LP 56.89 3.11 2.01 9.93
Tsakos Energy Navigation Limited 91.46 1.03 1.71 9.44
Hoegh LNG Partners LP 42.03 0.68 2.52 11.93
Peer Median 91.46 1.03 1.71 9.44
Best In Class 42.03 5.23 2.52 11.93

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Company Profile

Höegh LNG Partners LP provides liquefied natural gas transportation services. It is a limited partnership formed by Höegh LNG Holdings Ltd., to own, operate and acquire floating storage and re-gasification units, LNG carriers and other LNG infrastructure assets under long-term charters, which are defined as charters of five or more years. The company was founded on April 28, 2014 and is headquartered in Hamilton, Bermuda.

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