The investment thesis is the part of the process that takes us more time. After analysing the macroeconomic environment and developing a top-down approach where we identify the industries that can be benefited from the macroeconomic conditions (in the next 12-24 months), we study that industry and its players. That is why once we choose an industry, we usually share investment theses about several players in the same industry (as has happened with the luxury yacht builders recently)

Our preference is for small cap companies, as we believe that the risk-reward balance is more favourable and they tend to be less covered by analysts. Consequently, there are greater opportunities for outperformance in the market.

Initially, we only shared the investment thesis of the companies that make up our portfolio. However, as we have grown the team and there are several collaborators in Moram, we also share analysis of companies that we have discarded or we see as attractive but there are not included in the portfolio. Our idea is to continue growing and offering more investment thesis. Nevertheless, we prioritise quality over quantity, so this process will go step by step.

Investment theses Consumer Discretionary

Boat Manufacturers & Superyacht Sector

Investment theses Energy Sector

Latest 4Q20 Results This analysis of Golar LNG aims for explaining the business of Golar and the opportunity we identify at its current price. (Original – 18/04/20. Updated 23/12/20) What is Golar?  Golar LNG is one of the world’s largest independent owners and operators of marine-based LNG midstream infrastructure – active in the liquefaction, transportation and regasification of natural gas. Golar started as an LNG shipping company, but it has become an infrastructure company from 2016. The company has 110MM shares (after its recent AK) and a capitalisation of $950 as of 23rd December 2020. The EBITDA of FY19 was $255MM and it has a debt of $2200MM. Golar LNG has a 32% stake in its subsidiary Golar Partners LP and small participation in Avenir Furthermore, Golar Power (Hygo) is a Joint Venture 50%-50% with the Private Equity fund StonePeak. What is the business of Golar LNG? Golar is building and operating marine infrastructured related to the LNG. It has three divisions: shipping, FLNG and downstream. Traditionally, Golar has been a shipping company. However, since 2018, Golar is following a strategy to develop its downstream division and sell the shipping. Golar LNG – Shipping Golar LNG has 8 FDTE vessels and 1 steam vessel. Apart from that, Golar has recently sold the Golar Viking which has been transformed to an FRSU. This vessel has been renamed to LNG Croatia and Golar has a 10 years contract to manage it. In the 3Q20, Golar has signed term-contracts for 7 of its vessels, leaving 2 on spot. This means a change in its traditional approach to shipping as it usually has all its vessels in the spot market. We assume that because of Covid, Golar has been unable to sell its shipping division. And now, it prefers to secure a backlog for the next year ($198MM) to provide some earnings visibility to its creditors. The shipping division accounted for 52% of its revenues in 2019. It is expected that in 2020 the average TCE is around $50’000. It should be slightly higher in 2021 (following the company guideline in the 3Q20). The vast majority of the natural gas supply comes from the US, and the majority of the demand comes from Asian countries, mainly China, Japan and South Korea. Golar LNG – FLNG The FLNG division has one cargo which is tied to a long term contract (this new modality is the one which provides the highest margins. In addition to that, because the Floating Liquefaction Natural Gas does not need infrastructure associated, it is becoming prevalent in developing countries). Golar is building a new FLNG cargo tied to a 20 years contract with BP. This cargo will start operations in 2023. Golar Hilli is in operation since 3Q18, it has a contract until 2026 with Perenco in Cameroon which is expected to be extended soon. Hilli has a bonus of $3MM for every $ that Brent is higher than $60 up to a maximum of $100. This applies on a quarterly basis. Golar Gimi has a 20 years contract with BP and was expected for 4Q22. Nevertheless, because of Covid, it has been delayed 11 months. We have posted an special page for explaining Golar FLNG segment Golar downstream is Golar Power and now Hygo. The downstream division started its operations last 26th March 2020. Golar power built a gas to power central in Sergipe. It has a contract of 25 years with the Brazil government to sell the electricity produced at a fixed price. The Golar Nanook (FRSU) has a contract in Sergipe for the next 25 years. Apart from Sergipe, Hygo (Golar Power) is also building Barcarena, Suape and Santa Catalina in Brazil. Golar plans to replicate the Hygo business model in other emerging countries. Hygo is the main treasure of Golar, in spite of the frustrated IPO last September. Golar will re-launch the Hygo IPO in the 1H20. Hygo is so important for Golar that there is an specific analysis for it Why do we think that it is attractive to invest in Golar LNG? The company has changed its strategy in the last couple of years where the shipping business operated mainly on the spot instead of working tied to long-term contracts, which brings stability. Golar has moved from a cyclical business into a one which guarantees fixed cash-flow. Currently, it is looking for a buyer to sell its shipping division and focus on FLNG and downstream. After a considerable stock price fall due to the COVID-19, the delay of one year suffered from the new FLNG carrier from BP. Golar share price is at 5$ while Golar’s book value prices its shares at 16$. However, this is not the only main point. Still, Golar’s downstream division also makes money if the natural gas is at low prices as it uses natural gas to transform it into electricity. Because of the amount of fracking in the US, the production of natural gas is at its maximum level, bringing down its prices. Catalysts in the short term The company is modifying its complex structure, which in the past has put some investors away from Golar, and simplifying it. In the short term, there are several catalysts which can raise the share price of Golar LNG. The most important and expected of all is the IPO of Hygo, which is expected in the 1H21. Moreover, the FID of Suape and Barcarena from Hygo is expected on December 20 or January 21. Furthermore, Hilli has only contracted 2 trains out of 4 of capacity. There are negotiations between Golar and Perenco to both extend the duration of the contract and increase the production. Some news about it are expected in the 1H20. Last, the TCE for the shipping division has been over $100k/day for the last 2 months and it is expected to continue like that at least one more month. There are two Golar vessels on the spot market but the rest of them have contract tied (some percentage) to the TCE price. Golar LNG Valuation We did a valuation in April placing the share price of Golar between $18 and $22. However, we are going to post the full model with all their assets soon in the website. We believe that the valuation of Hygo in the IPO means that the target price of Golar is higher than the one pointed out in April Risks tied to the investment Analysis of Golar LNG – Conclusion: From our point of view, Golar LNG is one of the most undervalued companies in the market. It is true that in the last years, due to its bet for spot contracts, its earnings have been highly volatile. There was not the downstream division, and the cost of any of its acquisition has been huge due to the characteristics of its business. The situation is different now, Golar has become a stable cash flow infrastructure company, and they are in a sector which is growing very fast. However, it is important to keep an eye over the debt as there are maturities in the coming years that will have to be refinanced We will soon post our complete valuation of Golar LNG. The result of the SOTP valuation is between $24 and $27. Annex: Disclaimer: This analysis of Golar LNG cannot be taken as an investment recommendation. The picture is property of Golar LNG Limited. MORAM took its first position in Golar last April: More financial information about Golar LNG

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In early March, we hosted a Small Cap Investment Thesis Competition, showcasing 20 promising candidates. After rigorous evaluation, we selected 9 outstanding finalists, including Newlat Food Spa, Playway, Troika Media, Thrive Holdings, Nowvertical, and Atlas Engineered Products, among others. Click on the image next to this text to gain access to these 9 investment theses.

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