Page 122 - RusRPTFeb21

can be used for an extra one to two months every year, is “a step toward year-round commercial shipments on the route.”
Russian transport company Sovcomflot has signed a number of deals recently:
• Sovcomflot has signed an agreement with Total over the construction and operation of one more LNG carrier, with an option for two more.
• The ship is to start operations in 2023.
• The gas segment is the most profitable part of the company’s business, with an 80+% EBITDA margin (vs. 45+% in conventional).
• Currently, SCF’s LNG segment is one of the smallest in its business model, with 11 ships (8% of the total).
• However, it is a major focus for management, given the strong global prospects for the segment.
• Were the option for two additional ships to be exercised (we think that is likely, given the surge in LNG prices), we see upside of 2%, 3%, and 5% to our EBITDA forecasts for 2024-26F.
• The stock has been under pressure recently, as the typical seasonal pattern of rising 4Q spot rates in the conventional segment (transportation of oil and oil products) was broken in 2020 (rates went down in 4Q20).
• We believe this news will support the stock, providing reassurance about the long-term prospects of the business, and reiterate our Buy recommendation with a 12-month TP of RUB 140, ETR +61%.
122 ​RUSSIA Country Report​ February 2021 www.intellinews.com