NEW YORK (AP) -- A Jefferies analyst on Friday initiated coverage of two liquefied natural gas shipping companies with "Buy" ratings, saying that demand for their services can only increase.
THE BACKGROUND: The "Buy" rated companies include Golar LNG Ltd. The Bermuda-based company transports and trades liquefied natural gas. It buys, operates and charters LNH carriers and floating regasification units.
The other company, GasLog Ltd., went public in March. Based in Monaco, it operates 14 carriers for natural gas shipping. Its shares have fallen about 20 percent from their IPO price.
THE OPINION: Analyst Douglas Mavrinac said that both companies are "very well positioned" for long-term growth given the increasing demand from the liquefied natural gas shipping market.
"With 13 LNG shipping newbuilding vessels on order with deliveries scheduled between 3Q13 and 1Q15, we believe Golar has significant built-in growth prospects," Mavrinac wrote in a note to investors.
And he noted that "GasLog has significant built-in growth given its increasing tonnage over the next 18 months," with eight new vessels on order.
He set a $15 price target for GasLog shares and a $50 price target for Golar LNG.
Mavrinac said that while liquefied natural gas shipping charter rates could remain flat next year, with shipping capacity outpacing liquefaction capacity increases, the industry's fundamentals remain strong and liquefaction capacity should start to catch up in 2014. He thinks that will help boost rates down the road.
THE SHARES: In afternoon trading Golar rose 43 cents to $39.04, while GasLog shares rose 24 cents, or 2.1 percent, to $11.43.