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Suburban Propane Partners, L.P. Message Board

  • rightwingtrader rightwingtrader Jun 5, 2012 11:41 AM Flag

    It is a buy

    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

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SPH
37.45-0.64(-1.68%)Aug 3 4:02 PMEDT