SPH is a buy at these levels for the following reasons:
1. A strong balance sheet(which I know will be weakened with NRGY purchase). 2. Buying NRGY propane business at 8.5 times EBITDA. Which is extremely attractive given EBITDA numbers used are depressed compared to normal weather environment. 3. A reliable history of good cash management(i.e. distribution mgmt) 4. MGMT compensation is fair to shareholders. 5. MGMT has been with the company for years and have been promoted from within. 6. MGMT has a history of being able to generate business synergies. 7. Long range forecasts are leaning toward weak El Nino this late summer/fall. Which reinforces forecasts of a least a normal winter; with forecasts leaning harder on a cold winter(avgerage -3 degrees below normal.) 8. Wholesale propane prices are significantly lower than the average. 94 cents a gallon compared to $1.45 a year ago. Shale discoveries are starting to break the correlation to oil prices. NGL's are the byproduct of shale and are having in my view a significant downward effect on propane prices, which is looking to be permanant in the intermediate to long term. This is extremely favorable to retail propane. I think it will bring a breadth of life back into the business and stop the slow hemoraging. 9. This applies to all MLP's but I will say it anyway; Tax efficiencies in the case Bush Tax Cuts expire.
The negatives are already in my view priced in(I am excluding any market crash or short term hit to the market). Yes the market is supposedly shrinking permanantly, but...point 8 could very well start to balance the market out and position it for growth at a slow pace.
Just my 10 cents, hope this helps some of the people make a decision. I am also very bullish on NRGY now and post sale. You can read my short thoughts on the NRGY board. As always, I wont bother to spellcheck. Have a good day
Last post on this. I won't argue w/ you youre right.. On April 19, 2012, we declared a quarterly cash distribution for the quarter ended March 24, 2012 of $0.8525 per common unit, or $3.41 per common unit on an annualized basis. The distribution attributable to the quarter ended March 24, 2012 was paid on May 8, 2012 to holders of record of our common units as of May 1, 2012.
On April 25, 2012, our Board of Supervisors approved an increase in our annualized distribution rate to $3.50 per common unit (conditioned on the closing of the Inergy Propane Acquisition). The distribution at this increased rate will be effective for the quarterly distribution paid in respect of our first quarter of fiscal 2013 ending December 29, 2012 (assuming closing by the applicable record date).
I am very bullish on SPH.I have owned it for many years and keep buying more. It's incredibly cheap. I can't see it going much lower. The yield is between 9 and 10% and tax favored. If next winter is anywhere near normal, the distribution should be safe. When the benefits of its recent merger begin to kick in, it will probably be raised. The best thing about the company is that it has great management which has performed miracles during the last two recessions. My advice is to enjoy the fat yield while waiting for the stock to recover.
Great post. If they let the Bush tax cuts expire there would probably be a revolution in this country. It would crash the economy. It would be a self inflicted wound so severe I wouldn't want to think of the consequences. They might raise the brackets or sunset the estate tax but they're really in no position to pull the rug out. This guy at the bank( a Banker) was showing me some proposal by some guy in congress to tax dividends as ordinary income, not the buffett rule more drastic b/c it would affect everyone. No way.