Cheniere Energy Has a Strong Rally before Its 4Q16 Earnings


Feb. 22 2017, Updated 7:36 a.m. ET

Cheniere Energy’s market performance

Cheniere Energy (LNG) rose 11.2% in 2016. It had a strong start to 2017 as well. It has risen 12.7% since the beginning of 2017. In comparison, Cheniere Energy’s subsidiaries, Cheniere Energy Partners (CQP) and Cheniere Energy Partners Holdings (CQH), have risen 12.4% and 7.6%, respectively, in 2017.

At the same time, the Alerian MLP ETF (AMLP), which is comprised of 25 midstream energy MLPs, rose 3.0% in 2017. Cheniere Energy’s huge gain could be mainly attributed to the huge rise in LNG (liquefied natural gas) demand from Asian and European markets and the expected boost to LNG exports and energy infrastructure companies under Trump’s Administration. However, both Cheniere Energy and its subsidiaries are still trading below the levels before the rout in energy prices.

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Cheniere Energy’s valuation

Cheniere Energy’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple can’t be calculated due to its negative EBITDA in the last 12 months. Currently, Cheniere Energy trades at an EV-to-sales multiple of 40.3x. Cheniere Energy’s high valuation might indicate investors’ higher expectations from its LNG export opportunity. Cheniere Energy’s forward EV-to-sales multiple, which is based on the next 12-month sales estimates, is 8.2x. It reflects higher revenue in the coming quarters driven by LNG (liquefied natural gas) exports from Train 1 and 2 of the Sabine Pass Liquefaction.


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