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