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Ferrellgas Partners LP Message Board

  • cohencorp cohencorp Dec 28, 2012 12:08 PM Flag

    nearterm heavy pricedrop?

    anyone care to explain why and/or estimate nearterm new bottom? in at 18.10 painful!

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    • My target is zero. An organically declining business should trade at most 5 or 6x EBITDA. FGP has more than that in debt alone. The company has never generated enough cash to cover it's distribution so it's just a matter of time now before they have to cut or eliminate it - they can't keep borrowing more and more - just like Greece the end game is coming. When the cut happens I expect single digits. Even research analysts have $12 target prices and they are an optimistic bunch. The only long argument is simply that they've paid the $2 per year. But they've done it by borrowing and borrowing and they are close to maxing out on their debt covenants. Given the insider ownership it's hard for them to cut the dividend - mom and pops who sold out to FGP were promised continued dividends as a "retirement plan". And the business would shrink without the perpetual acquisitions so they need the fluffed up inflated paper to do deals. IMHO it's a house of cards that could unravel pretty quickly. FGP's bacon was save these last couple of quarters as margins held up with propane being cheap. But the U.S. is about to bring huge propane export infrastructure online so that jig is up. All bags care about is their "yield" so ask yourself what happens when they cut it. Now try to do any math that shows they can maintain it.

      Tick tock....

      Happy New Year

      Sentiment: Strong Sell

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