Liquefied Natural Gas Limited

LNG Details

Re-Domiciliation and Listing on NASDAQ: Liquefied Natural Gas Limited (ASX: LNG) is an Australian public company, engaged in the development of LNG export terminal projects in the United States and in Canada having combined aggregate design production capacity of 20 mtpa. The product portfolio consists of 100% ownership of the companies- (a) Magnolia LNG LLC (Magnolia LNG), an 8 mtpa or greater LNG export terminal development in Lake Charles, Louisiana, U.S., (b) Bear Head LNG Corporation Inc. (Bear Head LNG), an 8-12 mtpa LNG export terminal development at Point Tupper in Richmond County, Nova Scotia, Canada, (c) Bear Paw Pipeline Corporation Inc. (Bear Paw Pipeline), that is proposing to construct and operate a 62.5 km gas pipeline lateral to connect gas supply to Bear Head LNG, (d) LNG Technology Pty Ltd, owner of LNGL's patented optimized single mixed refrigerant (OSMR®) liquefaction process technology. The Board of Directors has recently approved the decision to re-domicile the company to the U.S. LNG will proceed to list on the NASDAQ Stock Exchange after regulatory and judicial approvals and an affirmative shareholder vote.

Theprocess related to the shift of domicile will be undertaken through a Scheme of Arrangement under the Australian Corporations Act (Scheme) pursuant to which LNG’s shareholders will exchange their securities in LNG for securities in a newly incorporated Delaware company (Newco), on the receiving of judicial, regulatory and shareholder approvals. On the other side, the Newco will file a registration statement on Form 10 with the SEC (U.S. Securities and Exchange Commission) which is one of the key requirements to list the stock on NASDAQ. The management expects the re-domiciliation to be completed in late 2019 or early 2020.

The Scheme will include the followings:

1. Each shareholder of the existing LNG will retain the same number of shares in the new company at a fixed exchange ratio.
2. The Scheme will be completed on a tax-efficient basis for the existing LNG and shareholders.
3. A Scheme Implementation Agreement (SIA) will be established between the existing LNG and Newco which will pertain all the details of the Scheme.
4. A Scheme Booklet will be lodged with the ASIC (Australian Securities and Investments Commission) which will also contain the details of rights of holders of LNG ADR (American Depository Receipts), options available to them, etc.
5. An independent expert will be hired to assess the interests of shareholders with regards to the Scheme.
6. The Board intends to recommend the shareholders vote FOR the Scheme.
7. Newco will file Form 10 with the SEC to register its common stock enabling a listing on NASDAQ.
8. A first Court hearing for the Scheme will be scheduled with the Federal Court of Australia or other court of competent jurisdiction.
9. The current LNG Shareholders will be called to vote on the Scheme which will be convened following the first Court Hearing. The Scheme will be understood as approved subject to certain fulfilled conditions.
10. After which, the Scheme will seek the approval by the Federal Court of Australia (or other court of competent jurisdiction) at a second Court hearing.
11. On the successful accomplishments of the above along with the approval of its listing application by NASDAQ, shares of Newco will start trading on NASDAQ. With this, existing LNG shares will be delisted from the ASX shortly after implementation of the Scheme.
12. Eligible existing shareholders, not willing to invest in Newco, will be offered a facility to sell their Newco shares through the proposed SSF (Share Sale Facility).

1H19 Performance: The company, in the period, posted a robust growth of 158% in topline to $0.439 million. Net losses saw a rise of 27% to $16.9 million during the period. The following chart gives a broader idea of the movements witnessed:


1H19 Operating Results (Source: Company Reports)

Stock Recommendation: At the current market price of $0.270, the stock is trading towards the lower end of its 52-week range. The stock has corrected ~52% in the last 1-year. On the news of Board’s approval related to its re-domiciliation and listing in U.S., the stock zoomed ~25% on 22 July 2019. Hence, considering the price movement linked to the latest news, delisting from ASX, listing on NASDAQ and financial history etc., investors might be willing to evaluate to hold any interest given the new listing and stake in new company or sell the stock under the Share Sale Facility. We give a "Hold" at current market price of $0.270 per share (down 8.475% as on 23 July 2019).


LNG Daily Chart (Source: Thomson Reuters)

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