Hmmm, looks like XTXI investors are sheep being herded by the analysts rather than formualting their own opinions. I listened to the call and came away with mixed news, but the dividend projections they gave were still very good. The $2.40 to $2.65 number is the paid, not the annualized run rate. Same thing with XTEX. I think that is a misunderstanding by many. Surprised to see two days of being down $1.00 and then a $3.00 drop leading me to think that most are following analyst projections rather than thinking for themselves. I would have expected the opposite. Down $3.00 on day 1, followed by 2 $1.00 down days. Oh well, the market isn't efficient.
Notice Morgan Stanley is looking to buy XTXI (corr10001 pointed that out). Looks like MS would use the operations as a group of assets to trade around (storage. pipelines and barges would allow them to make bets on forward pricing, as well as let them take advantage of differential pricing.
I haven't listened to the replay yet but I have gone through the (very long) slideshow. Toward the end management forecasts a $0.90 quarterly dividend by Q3 07. Does anyone think that the stock would still be in the mid-70's then?
If you assume that GP's or specifically this one continues trading around the same yield, let's say 3 to 3.5% (with annual div of 3.60) then of course the stock will go up. Then you're talking $100+ easily.
But...what if GP valuations don't continue to fetch the same premium. 3.60/74 = 4.8%. I don't think XTXI will be trading with a 4.8% yield in '07, but I wouldn't bet my life on it.
Of course a lot of other things come into play, but my point is that GP valuations aren't as established as LP's. Who knows what Q3 of '07 holds for the GP's...
Lehman's put out some decent stuff comparing the GP valuations. Before this drop XTXI and EPE were looking a little pricey and ETE was the bargain.
You can find it at end of the latest MGG report as well as the XTXI one I believe.
If you haven't joined the group yet I have those up at: http://finance.groups.yahoo.com/group/mlp_research/
I'm starting to put more in GP's as time passes. I know they have a sweet deal in the whole MLP setup, but I'm only willing to pay so much for future growth.
XTXI was looking way overblown to me up in the high 80's. EPE's looking pretty richly valued but if Dan likes it at that price, who am I to knock it.
A case of not paying for growth would be APL. Yield around 8.1% and been growing its distribution by 15% a year. But that caters to the value investor in me.
But since you're a GP specialist...
Which GP's are your favorites? and which are attractive valuation-wise in your eyes right now?
^^...The Davis' seem honest. I like the way they don't sugar-coat shortfalls or potential problems. ....^^
I do not post much here or at XTEX though I have IPO-obtained positions in both. Following may or not be useful.
When I was first considering investing in XTEX, I called around Dallas soliciting info on Barry Davis' integrity and competence. I received unanimous positive responses from a half dozen respondees. The icing on the cake was when the landman for a medium sized operator told me he would like to get a job with Crosstex because in his opinion, they were the "cream of the crop".
Two concerns with the Davis':
(1) there are 4 of them (siblings) now and who knows how many more if you count spouses and more distant relatives, such as nephews etc.
(2) the top two Davis' are consistent (and big) sellers. I know that selling by the executive team has to be done, but it is a concern, when you see the company growing so rapidly. What the heck?
That's all. I am an investor and I have a large investment with them for a long time, so obviously I am very happy. This has become my second largest holding and competing for #1 spot (as it grows in valuation).
Despite all my concerns, they are managing extremely well and it is the exception that breaks the rules. I would rather they were not so "exceptional".
I have talked/emailed privately with some of the frequent posters on the MLP/GP boards. It is more difficult to value the GP's than the MLP's. The market was, and you could probably say, still is using yield. The truth is that there are a multitude of different and better ways to analyze them. The growth leverage they possess, the capital structure(taxable or non-taxable entity), amount of debt/leverage at the GP, the existance of lack of operating assets at the GP level, the growth prospects of the MLP, the average cost of capital for the MLP, etc etc etc. Its not as easy as saying they should all trade at a 3.00% yield. Most of the public GP's have nice niche. Kinder Morgan has the CO2 tertiary recovery operations, Enterprise has a near monopoly on the Mont Belvieu NGL hub etc etc.
I personally like Crosstex and a quasi MLp, Copano, because of management and growth prospects. Lehman highlighted the growth prospects at XTXI are not nearly diminished as the market has seemed to think. These are great opportunities. Copano has huge growth built into the existing assets yet the market does not reflect all of it into the price. It is trading at a lower yield but remember it has no GP to pay, and they are still small, have a great balance sheet and a huge coverage ratio. They could notch the distribution up for a year or two (albeit at small increments every Q) without ever having to make any acquisitions and still be in great shape a year or two from now. Right now the market is saying, show me for both XTEX/XTXI and CPNO and I think they will both come through strongly.