A Forgotten Fortress: $NFE Valuation

The ROI Club April 2024

Back To My Bread & Butter - Valuation

This edition is purely focused on an investing opportunity I really like.

I’ll be providing a free overview of the thesis from a top-down macro perspective (Free) followed by my valuation and positioning in this high conviction position (Not Free because it’s worth a lot!)

Gentlemen, Let’s dig in..

Investment Idea: New Fortress Energy Stock. NASDAQ: NFE

Macro/Meso Environment Backdrop:

My ‘big picture’ macro view that we are likely to see a stag-flationary environment in the OECD ‘nations’ is already well known. As is my preference for protecting purchasing power and profiting through inflation beneficiaries particularly: energy stocks (ex gas) and those ‘ticket clippers’ such as royalty and infrastructure Co.s.

Today’s focus is on a misunderstood opportunity which has segments covering all the aforementioned attributes.

Executive Summary

New Fortress Energy Inc. operates as an integrated gas-to-power energy infrastructure company that provides energy and development services to end-users worldwide. The company operates in two segments, Terminals and Infrastructure, and Ships.

The Terminals and Infrastructure segment engages in the natural gas procurement, liquefaction, logistics, conversion & power generation. The Ships segment offers floating storage and re-gasification units (FRSU), and liquefied natural gas (LNG) carriers which are leased to customers under long-term or spot arrangements.

People mistakenly believe this is a “gas company”. Please understand this: *IT IS NOT A NATURAL GAS PRODUCER!*

It is an electricity company buying cheap gas, transforming it into expensive electricity and selling that electricity.

High margins with assured contracts.

Here’s a link to their prospectus and yes, it’s very long, but I’ll underline one quote which sums up the company nicely:

“We believe that the world is “long” gas and “short” power, and that natural gas is a compelling fuel for power production”

Investment Thesis:

NFE is misunderstood infrastructure/power company trading below it’s replacement cost (Using Market Cap) with no more CAPEX, at 20% free cashflow yield (FCF) + long term contracted sales.

Ratios & Technicals:

Recently sold off and out of favour I believe this represents a great chance to add some shares. RSI near 30 shows selling momentum is slowing.

Valuation Deep Dive: NFE 0.00%↑

So then, what is NFE 0.00%↑ worth today and why do I think there’s the very rare opportunity to buy a power generation business at half it’s usual multiple and less than it’s replacement costs?

Let me show you my valuation..