U.S. Markets open in 7 hrs 53 mins

BMO: Enable Midstream 'Reasonably Valued'

Jayson Derrick

Enable Midstream Partners LP (NYSE: ENBL), an owner, operator and developer of natural gas and crude oil infrastructure assets, is "reasonably valued" due to continued headwinds, according to BMO Capital Markets. 

The Analyst

Danilo Juvane initiated coverage of Enable Midstream Partners with a Market Perform rating and $14 price target.

The Thesis

Enable has performed well recently in a challenging commodity price environment, limited capital market access, and pipeline regulatory shifts, Juvane said in a Thursday initiation note. (See his track record here.) 

Yet the company is likely to continue seeing moderating volume growth in its gathering and processing business, which accounts for 65% of total EBITDA, the analyst said. 

The remaining 35% of EBITDA comes from the transportation and storage business, which faces uncertainty in terms of near-term contract renewals, he said. 

External headwinds include equity overhang from CenterPoint Energy, a general partner that owns around 54% of common units, Juvane said.

The company has a high degree of customer concentration, as 61% of all natural gas gathered volumes were delivered to just five customers; 51% of transportation and storage revenues also came from five customers, the analyst said.

If a main customer lowered its orders with Enable, it would negatively impact the company's financial position, he said. 

Enable shares are trading in-line with the peer group averages at 10.2 times 2020 EBITDA, which prices in multiple headwinds and upside potential of around 14%, according to BMO. 

Price Action

Enable Midstream Partners shares were trading higher by 1.08% at $13.15 at the time of publication Thursday. 

Related Links:

Bring Some Excitement To The MLP Trade

Benzinga's Top Upgrades, Downgrades For June 20, 2019

Latest Ratings for ENBL

Date Firm Action From To
Jun 2019 Initiates Coverage On Market Perform
May 2019 Upgrades Neutral Buy
Feb 2019 Upgrades Hold Buy

View More Analyst Ratings for ENBL
View the Latest Analyst Ratings

See more from Benzinga

© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.