Barclays Lifts PT on Global Partners (GLP) to $16; Sees Asset Sales Alleviating Leverage
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Barclays boosts its price target on Equal Weight-rated Global Partners (NYSE: GLP) from $14 to $16 following recent Q2 results.
Analyst Heejung Ryoo commented,
Asset sale proceeds to alleviate leverage, no distribution growth in the near term. We believe GLP will be able to achieve its target leverage of sub-4.0x after the planned divestiture of non-strategic assets. The Partnership has already raised $103.5mm and intends to sell another 90mm sites in MA, CT and NY. While we view GLP's steps in managing its balance sheet as positive, growth is still far off. GLP continues to carry significant fixed costs for rail, pipeline and barge expenses ($50-$60mm per year for rail and pipeline alone during 2016-2018). The Partnership will likely see some alleviation beginning in 2019 when its rail leases decline to $20mm and expire thereafter. We believe GLP will be prudent in managing its distribution growth during that timeframe, as the market seemingly only gives credit for sustainable increases. In the meantime, we believe GLP will continue to opportunistically capture EBITDA in other areas to counter the crude-by-rail headwinds, such as taking advantage of contango market in its storage facilities and executing small organic projects.
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