Natural Gas Monopoly with Avalanche of Catalysts for 7x P/E
5x Utility Play with Growing Insider Ownership
Summary:
The company in question is one of the world’s largest suppliers of natural gas. Over the past few years, it has developed a portfolio of highly profitable assets, generating EBITDA and FCFF margins of over 40% and 25%, respectively.
Currently, the stock is extremely undervalued, trading at approximately 7x 2027E P/E and ~4x 2027E P/FCF ratio.
Recently, insiders have been buying shares in bulk, acquiring an additional 5% of the company, while institutional investors are also increasing their stakes.
We have identified five major catalysts that are expected to occur within the next 3 to 12 months, which could be significantly transformative. These events may result in an increase of $0.6bn in core EBITDA and over $0.4bn in additional cash flow, along with a similar amount from one-offs.
Although the stock has been under pressure due to extra debt and equity issuance, the situation is improving. With nearly a 90% reduction in capex this year, the company is expected to deleverage quickly and has a few additional cards at its disposal to make it happen.
Our valuation suggests a potential upside of ~5x based on steadily increasing EBITDA, Capex reduction, and deleveraging, indicating a high likelihood of a rerating in the coming months.
Moreover, a plethora of major catalysts combined with double-digit short interest creates an ideal setup for a potential short squeeze in the upcoming months.
In summary, we have a highly profitable and fast growing business, rapidly improving cash flow, huge insider buying, many major upcoming catalysts, and short squeeze setup — all for a stock at 7x P/E — not bad