Hoegh LNG Partners (HMLP) & Scorpio Tankers (STNG) Critical Comparison

Hoegh LNG Partners (NYSE: HMLP) and Scorpio Tankers (NYSE:STNG) are both small-cap transportation companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, earnings, dividends, profitability, risk, institutional ownership and analyst recommendations.

Institutional and Insider Ownership

64.1% of Hoegh LNG Partners shares are owned by institutional investors. Comparatively, 65.4% of Scorpio Tankers shares are owned by institutional investors. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Hoegh LNG Partners pays an annual dividend of $1.72 per share and has a dividend yield of 9.8%. Scorpio Tankers pays an annual dividend of $0.04 per share and has a dividend yield of 1.3%. Hoegh LNG Partners pays out 109.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Scorpio Tankers pays out -5.1% of its earnings in the form of a dividend. Hoegh LNG Partners has increased its dividend for 3 consecutive years. Hoegh LNG Partners is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Hoegh LNG Partners and Scorpio Tankers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hoegh LNG Partners 38.90% 7.77% 3.30%
Scorpio Tankers -31.12% -6.47% -2.52%

Earnings and Valuation

This table compares Hoegh LNG Partners and Scorpio Tankers’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Hoegh LNG Partners $91.11 million 3.80 $41.37 million $1.57 11.15
Scorpio Tankers $522.75 million 1.80 -$24.90 million ($0.79) -3.84

Hoegh LNG Partners has higher earnings, but lower revenue than Scorpio Tankers. Scorpio Tankers is trading at a lower price-to-earnings ratio than Hoegh LNG Partners, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Hoegh LNG Partners has a beta of 0.93, suggesting that its share price is 7% less volatile than the S&P 500. Comparatively, Scorpio Tankers has a beta of 1.58, suggesting that its share price is 58% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and price targets for Hoegh LNG Partners and Scorpio Tankers, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hoegh LNG Partners 0 0 5 0 3.00
Scorpio Tankers 0 0 11 0 3.00

Hoegh LNG Partners presently has a consensus target price of $21.63, indicating a potential upside of 23.57%. Scorpio Tankers has a consensus target price of $6.44, indicating a potential upside of 112.46%. Given Scorpio Tankers’ higher probable upside, analysts clearly believe Scorpio Tankers is more favorable than Hoegh LNG Partners.

Summary

Hoegh LNG Partners beats Scorpio Tankers on 8 of the 14 factors compared between the two stocks.

About Hoegh LNG Partners

Hoegh LNG Partners LP owns, operates and acquires floating storage and regasification units (FSRUs), liquefied natural gas (LNG) carriers and other LNG infrastructure assets under long-term charters. The Company’s segments include Majority held FSRUs, Joint venture FSRUs and other. The Majority held FSRUs segment includes the direct financing lease related to the PT Perusahaan Gas Negara (Persero) Tbk (PGN) FSRU Lampung and the operating lease related to the Hoegh Gallant. The Joint venture FSRUs segment includes approximately two FSRUs, including the GDF Suez LNG Supply S.A. (GDF Suez) Neptune and the GDF Suez Cape Ann, which operate under long term time charters. The Company intends to acquire newbuilding FSRUs on long-term charters, rather than FSRUs based on retrofitted, first-generation LNG carriers. The PGN FSRU Lampung is located offshore in the Lampung province at the southeast coast of Sumatra, Indonesia.

About Scorpio Tankers

Scorpio Tankers Inc. (Scorpio Tankers) is engaged in the seaborne transportation of refined petroleum products in the international shipping markets. The Company operates through four segments: Handymax, MR, LR1/Panamax and LR2. As of March 15, 2017, the Company’s fleet consisted of 78 owned tankers (22 LR2, 14 Handymax and 42 MR) with a weighted average age of approximately 2.3 years, and 19 time or bareboat chartered-in tankers, which it operated (one LR2, one LR1, eight MR and nine Handymax) (collectively referred to as its Operating Fleet). As of March 1, 2017, the Company’s total oil tanker fleet (crude, products and product/chemical tankers) consisted of 4,754 ships with a combined capacity of 525.9 million deadweight tonnage. As of December 31, 2016, the Company also had contracts for the construction of one LR2 tanker and eight MR tankers. Its vessels include STI Brixton, STI Comandante, STI Finchley, STI Hammersmith, STI Larvotto, STI San Antonio and STI Regina.

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