How Cheniere Energy Is Placed for the Rest of 2017 and Beyond

1 2 3 4 5 6 7 8 9 10
Part 7
How Cheniere Energy Is Placed for the Rest of 2017 and Beyond PART 7 OF 10

What Does Cheniere Energy’s Current Valuation Indicate?

Cheniere Energy’s valuation

So far in the series, we’ve talked about recent trends and the outlook of the global LNG (liquefied natural gas) market. We’ve also examined Cheniere Energy’s (LNG) recent financial and market performances.

In this article, we’ll perform a valuation analysis of Cheniere Energy based on its historical and forward multiples.

What Does Cheniere Energy’s Current Valuation Indicate?

Interested in LNG? Don't miss the next report.

Receive e-mail alerts for new research on LNG

Success! You are now receiving e-mail alerts for new research. A temporary password for your new Market Realist account has been sent to your e-mail address.

Success! has been added to your Ticker Alerts.

Success! has been added to your Ticker Alerts. Subscriptions can be managed in your user profile.

Cheniere Energy’s EV-to-sales

Cheniere Energy was trading at an EV-to-sales ratio of 15.2x on July 13, 2017. Cheniere Energy’s forward EV-to-sales ratio, which is based on its next-12-month sales estimates, is 7.8x. This ratio could reflect higher revenue for the company in the coming quarters driven by the commencements of Trains 3 and 4 at its Sabine Pass liquefaction facility. Cheniere’s forward EV-to-sales ratio is quite high compared to the peer median of 2.7x.

Cheniere Energy’s EV-to-EBITDA

Similarly, Cheniere’s forward EV-to-EBITDA ratio of 18.8x is higher than the peer median of 12.9x. However, its ratio is lower than its historical five-year average of 149.6x.

Cheniere Energy’s high valuation compared to those of its peers may not be justified considering its high leverage, low operating cash flows, and the uncertainty in the global LNG market. At the same time, Its high valuation could reflect its first-mover advantage, the government’s current bullishness on LNG exports, a fixed cash flow from its LNG trains with 87% of total capacity tied to long-term take-or-pay contracts, and other expansion opportunities.

The company expects to generate EBITDA of $3.8 billion–$4.1 billion after the successful completion of all seven of its trains in 2019. Based on the midpoint of this guidance, the company is currently trading at an EV-to-EBITDA ratio of 9.3x. Similarly, the company is trading at a price-to-distributable cash flow of 7.1x based on its run-rate distributable cash flow guidance of $1.5 billion–$1.7 billion.

In the next article, we’ll look into Cheniere Energy’s technical indicators.


Please select a profession that best describes you: