I think the company rates a buy at current levels irrespective of multiples in anticipation of a cash waterfall a few years hence for patient investors as sales ramp up and capex diminishes. With three trains online WDS has the capacity to be exporting a couple of hundred cargoes out of LA-LNG as the next decade starts, with an additional ~150 cargoes from the later brownfield development of trains 4-5. The buy case for WDS is certainly around Scarborough and LA-LNG coming on line as we head into the 2030'sThe company trades at a pretty attractive EV/EBITDA multiple-4.11X in comparison with other participants in the LNG cohort, including segment leader, Cheneire Energy, (NYSE:LNG) at 11X. It also pays a nearly 9% yielding dividend that is well covered by cash flow, with a payout ratio-68% that might bear a little watching.There are risks to this thesis, notably the $9.0 billion in debt the company has accumulated building Scarborough. In contrast, they have $4 billion in cash and an undrawn $6.5 billion RCF. Maturities are spaced out every 4 years, preventing any sort of a credit squeeze. The LNG market appears to have a long runway, thanks to increasing energy demand projections in Asia, Africa, and Latin America. If they don’t pan out, the company could have some problems. Most analysts view the long-term market for LNG as being robust for the next several decades.If you're one of those investors who looked at Cheneire a dozen years ago at $15.00 and passed, and watched it ramp ever higher ever since, this could be your chance to get in on the fun.
WDS Price at posting:
$22.80 Sentiment: Hold Disclosure: Held
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