Why BTIG Thinks Cheniere Energy Weakness is Fleeting Technical


BTIG analyst William Frohnhoefer came out with his views on Cheniere Energy Inc. (NYSE MKT:LNG), after the company announced Tuesday that it would place a new convertible financing, sending shares plunging 3.5 percent. The analyst rates the stock a Buy with a price target of $100, which implies an upside of 27.5% from current levels.

Frohnhoefer noted, “We estimate that this cost of capital would be approximately 10.75% if this higher-cost scenario plays out. A share price of $180 would represent less than eleven times 2020 EBITDA under the $30/share guidance—a fairly low multiple for a GP entity.”

Furthermore, ‘As disclosed in the schedule attached to that term sheet, the accreted amount at 5 years (before interest) is $518mm. Although it is not specifically stated in the term sheet, we operate on the conservative assumption that holders wou ld receive the customary convertible make whole (very different from a straight corporate make whole) in the event the shares trade below $124 as of a March 15, 2020, redemption. So the lower cost of capital scenario approaches rates closer to an effective 5%.”

“In other words, there was no reason we see, other than a fleeting technical, for the shares to trade down on this convertible financing. We believe Cheniere did well for itself with this transaction.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst William Frohnhoefer has a total average return of 24.5% and a 50.0% success rate. Frohnhoefer has a 25.3% average return when recommending LNG, and is ranked #569 out of 3505 analysts.

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