Global Partners LP (GLP - US$ 10.25) 2-Equal weight
Change of Earnings Forecast
Expect Continued Share Price Volatility
GLP's above-average risk profile (stemming from seasonal cash flows, small size and low trading liquidity) is heightenend in turbulent capital markets. We believe GLP's share price will continue to exhibit a high degree of volatility. Our $15 price target is based on a 12-month distribution run rate of $1.95 and 13% target yield.
3Q EBITDA matched our estimate, as improved gasoline volumes and margins offset a weaker distillate market. Overall, 3Q EBITDA up 1% YoY.
As expected, GLP's quarterly distribution was flat at $0.4875 per unit ($1.95 annualized). Due to the weak economy, volatile capital markets and previously record high commodity prices, investors have been concerned about the security of GLP's distribution. We believe GLP has sufficient distribution coverage of 1.2x to maintain its current $1.95 distribution. During the earnings conference call, management stated it expects 4Q distribution to be maintained at the current level.
At the end of 3Q, GLP had $212 MM of liquidity on its $750 MM revolver. The revolver is supported by 13 banks and does not expire until April 2011. The majority (85%) of GLP's debt is working capital related. GLP is entering heating season.
....Barclay's is just like every other brokerage house, they simply issue what we read from news releases and filings and already know. Any picture too rosy, opens up the sardine can! Bought GLP for the high yield and on going business model. Every one needs fuel for what ever reason, this will not change. Would be nice if upside was in high twenties again, but this is likely a year away! In the meantime nice returns, just watch the bank account rise!!!!