Energy Transfer Partners. L.P. (ETP) OUTPERFORM Y. Siegel
CP: US$ 44.11 TP: US$ 49 CAP: US$ 7.4b
INITIATING Coverage with an OUTPERFORM Rating and a $49 Target Price - Core MLP Holding with Visible Growth but Some Near-Term Headwinds
• We initiate coverage of ETP with an Outperform rating and a 12-month price target of $49. ETP provides a current yield of 8.2% and offers a three-year distribution CAGR of 4.7% by our estimates.
• Investment Case: ETP is a core MLP holding, in our view, with an expansive and well-positioned network of natural gas pipelines. Although we see potential near-term headwinds (the current low natural gas price environment, narrow basis differentials, and difficult third quarter comps), we believe ETP should provide investors with an attractive long-term total return, as cash flows from its expansion program should drive distribution growth.
• Forecasts: We expect EBITDA to ramp up from $1.5 billion in 2009 to $1.7 billion in 2010 and $1.9 billion in 2011, mainly driven by contributions from major natural gas pipeline expansions coming on line. Distribution coverage should remain at approximately 1.1 times over the forecast period.
• Valuation: We derive our price target of $49 through a distribution discount model. Our assumptions include a discount rate of 10%, distribution CAGR of 4.4% over five years, and a perpetual growth rate of 1.5%.
What is the date of that upgrade. I think they are right at Suisse. THe major MLP's are doing beautifully. KMP, PAA, EPB have outperformed and I agree with the bankers that they will continue to grow as the economy improves and the demand for oil and gas grows.
The Clean Fuel alternative is surely gas vs coal and the politicians are slowly learning that is true.