The latest amendment to the S-1 was filed. The proposed selling price is $19-21 for 16mm shares. NRGY would own 78.5% after the offering. The annual dividend would be 1.48% or about 7%. At the midpoint $20 price, it would represent a value of $1.486 billion or 18 times last year's EBITDA, but 12 times next year's adjusted EBITDA which I think is a lower multiple than comparable storage MLPs like PNG.
I think that's a possible direction for the company to take but of course I don't know their intentions.
It would be funny that they bought out the GP not long ago if they then go and set up a similar GP-LP structure. But you are right...I could certainly imagine them divesting the propane business to focus on midstream with NRGY becoming purely the GP for NRGM.
Liza, I understand NRGY is now a GP, but it is also an operating company. My question--not well phrased, i admit--was whether they might get out of the operating end by IPO-ing the propane operations as they did the midstream operations. Something seems to have changed since they bought NRGM to get out of the high splits situation--maybe they now intend to go completely in the other direction?
Wish I knew of a way out of this stock. Management is reaping the benefits while price growth has been held down and even with their dividend yield is not really worth holding until 2015 when they MIGHT begin seeing a rel $$ profit.
I think the case for a small speculative position in NRGY is compelling. When NRGY starts increasing distributions again, which probably won't happen for another couple of years, the yield should drop down to 8% or so, implying significant price appreciation. In the meantime, I get 11+% in distributions. Over a 3 year time frame, I am hoping for a total return, yield plus price appreciation, of 20% or more. If the price drops enough to get the yield up over 12% again, I might add more. What other investments do you see with better risk-reward ratios?
So Liza, are you saying that they are heavily incented to grow the distribution over the initial $0.37 quarterly amount because NRGY will collect 50% over the initial amount? this would be good for both NRGM holders (their distribution grows quickly ) and NRGY holders(the amount they get from the IDRs grows quickly).