Nakilat to make waves

Nakilat expected to report rising profitability as a result of fleet expansion.

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Nakilat, a Qatari liquefied natural gas (LNG) shipper, is expected to report improved earnings today on the back of its fleet expansion earlier this year. Analysts at Nomura and EFG Hermes are on average expecting a net income of 209.5 million Qatari rials for this quarter, up 83 per cent from 114.5m Qatari rials in the same period last year and up 25.8 per cent from the previous quarter this year.

Nakilat, also known as Qatar Gas Transport, has already gained significant momentum ahead of the results, up 7.8 per cent to 19.2 rials since July 4. Traders see the movement largely as a symptom of increasing global demand and the sentiment that shipping rates have bottomed out. As the primary shipper for Qatar's thriving natural gas industry, Nakilat is somewhat shielded from potential demand fluctuations. The company has added four vessels since January, including one this quarter.

The Nomura analyst Scott Darling remains positive about the company and sees the current share price levels as offering good value. "Nakilat's shipping business, less immune to shipping rate fundamentals, should see the company continue to deliver strong earnings growth owing to higher fleet utilisation and expansion," he said. Mr Darling has a "buy" rating on the stock with a price target of 31 Qatari rials, up more than 50 per cent from where it was trading yesterday.

Nakilat's revenues are expected to rise significantly along with profits, with only a portion of the increase attributed to the company's new capacity. Operational costs are expected to rise as the company services its debt obligations. The stock may be less attractive for short-term investors who expect growth from a capital perspective and more suitable to long-term investors who prefer a hefty dividend yield. "The potential for a higher dividend payout into next year provides investors with a more liquid bond-like investment opportunity," said Mr Darling. Nomura forecasts a 4 per cent dividend yield for this year.