What’s Driving Höegh LNG Partners’ Earnings Margin Higher?
TTM EBITDA margin
Höegh LNG Partners (HMLP), which provides floating LNG (liquefied natural gas) services, comes in 8th place in terms of EBITDA (earnings before interest, tax, depreciation, and amortization) margin among the top MLPs (master limited partnerships) today.
HMLP posted a TTM (trailing-12-month) EBITDA margin of 75.7% for 3Q17. Similar to Golar LNG Partners (GMLP), HMLP’s high EBITDA margins have been driven by its low operating expenses.
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Trend in recent quarters
The partnership’s EBITDA margin rose to 77.8% in 3Q17, compared with 76.5% in 2Q17 and 70.0% in 3Q16. This represents QoQ (quarter-over-quarter) and YoY (year-over-year) margin expansions of 129 basis points and 778 basis points, respectively.
This increase was primarily due to higher revenue growth, compared with its increase in vessel operating expenses. However, joint venture losses impacted the partnership’s net income margin in 3Q17. The partnership reported a 3Q17 net income margin of 15.1%, compared with 59.5% in 3Q16.
HMLP was last upgraded by Barclays to “overweight,” which is an equivalent to a “buy,” in July 2017. This is the only rating update that HMLP has seen in 2017.
Now, 100% of the analysts tracking HMLP recommend a “buy.” Of the nine analysts surveyed, four recommend a “buy,” and five recommend a “strong buy.”
HMLP is now trading below the low range ($20.5) of the analysts’ target price. HMLP’s average target price of $21.8 implies a ~25% upside potential from its current price level.
In the next part, we’ll look at GasLog Partners’ (GLOP) the EBITDA margin.