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Enterprise Products Partners L.P. Message Board

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  • rrb1981 rrb1981 May 10, 2005 11:32 PM Flag

    DCF figures and valuations

    That is a top notch website.

    If you are looking to add anything, one thing that I do on a frequent basis, is sort the MLP's by yield(or by the inverse of yield which is the multiple on the distribution). I have uncovered more info from that simple charting exercise than just about anything else. You would be surprised at the movement that takes place.

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    • Re to:rrb
      "one thing that I do on a frequent basis, is sort the MLP's by yield.."

      One thing I do is to take distributions for 10 periods and in XL spreadhseet do a best fit growth curve. I do it in two parts to see if there is a best fit for part of the time and a best fit for another part of the period. This helps even out the stair step effect of distribution rates. Surprise is that for several MLP's the rate of growth increased at a pivot point ~April 04. I find a best fit growth line for the first 6 quarters, then the last 4 are in a higher growth line. This takes a bit of work, so I only do it for the ones that I am interested in. That is my list of 10 MLP's that are 5 years or older, and in the pipeline, NG, Curde business. That group of 10 had a total return of 29.3% for 12 months ending 4-29-05 and 250% total return for 5 years ending on same date.

      By the way, worst in class is EEP @ 14% and 99% respecively. Still way ahead of most investments.

      Example of best fit growth
      PAA 4.0% growth for 6 perids, then 12.0 for last 4 periods. (quarters)
      BPL 3.5% and 7.2%.

      I see EPD as a straight line 7.6% with no break in rate.

      I see APL as a straight line 14.4%.

      APL has a price/dist of 57 which is the low priced high growth one of the 10 for now.

      BPL which is a modest grower got it's sails trimmed a bit yesterday. It was pushing 70 P/d and a modest growth MLP. Now only about 64 p/d.

      Happy investing

      -chart-

    • rrb1981 wrote: "one thing that I do on a frequent basis, is sort the MLP's by yield."

      At present, I do not have an alogrythm that will do that. I would like to keep the coding simple, in the event that I find a newbie that will eventually take over the update. Also, I currently think that yield movements are the result of price movements [except when they are the result of distribution movements] - and price movements result from other factors [like distribution changes, earnings estimate changes, DCF changes, rating changes, and secondary stock offerings].

      What I want the update to do is explain price movements. Example: CPNO, EPP, KMP, PAA, and PPX had distribution increases during April. So it would be nice to see this reflected in their price movements. Did it happen? NO!! Does this happen with REITs and banks - YES!! There is a strong correlation between distribution increases and stock movements. There is a strong correlation between [FFO and EPS] estimate changes and price movements.

      So the MLP update is failing to explain price movements [while my REIT and bank updates are doing a good job].

      Does that fact that MLPs have K-1's and more tax implications when they are sold effect monthly price movements? Does lower institutional ownership mean less churn? Are MLPs slower to react to new market conditions? I currently believe the answers to all of the above are yes.

      Why did HEP move up 20% last month? A distribution change? No. An upgrade? No. An EPS change? No. It probably went up because it had a decent CC, and it is just now getting on investors radar screen. And if there were changes in HEP's fundamentals, they have yet to be reported in the metrics that I follow.

      I would suspect and predict that as this sector matures and as institutional ownership increases - the metrics that I follow and report on the update will do a better job in explaining price movement.

      As an example of my expected future success in explaining movements - view the Dec 2004 REIT update. You will see that changes in FFO estimates do a very good job of explaining price movements for the year. And to some extint, those REITs that had a level of success beyond what their FFO movements would explain in 2004 are paying back this outperformance in 2005. Maybe my MLP site will be as predictive in 2006.

      Thanks for your suggestion, and your compliments.

 
EPD
77.71+1.26(+1.65%)Jul 9 4:00 PMEDT

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