LNG 3Q2017: 2018 looks to be breakout year, but depends on commercialization

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Market Price (11/14/2017): $48.50/share; ST-Target: $65/share; NIV: $221/share

  • In our opinion, Cheniere needs to buy back all CCH HoldCo II Convertible Senior Notes (CCH Holdco 2 Convertibles), but conversion unlikely before March 1, 2020. So, we feel investors won’t be concerned until 2H2019.
  • We like that Cheniere’s looking at ways to deploy future FCF, but not thrilled about foreign and liquids-based ventures. We believe there are many US opportunities involving E&P, pipelines or M&T
  • We believe CQH and CQP roll-up will happen in due time
  • LT, Chenier faces under-leverage problem. We’d like Cheniere to take excess cash flow to pay dividend after rolling up CQH and CQP and after its 3rd-act, but no share buybacks.
  • As expect global LNG markets are tightening quicker than past expectations, but we wonder how much of it is due to Qatar sanctions imposed by neighbors
  • 2018 likely to be driven by SPL 6 and CCL 3 FID and associated LT-contracts
  • We believe CNPC MOU will lead to LT-contract and both SPL 6 and CCL 3 will FID in 2018. We also look for additional LT-contracts to boost value.

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