Mizuho Securities Starts Dominion Midstream Partners, LP (DM) at Buy
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Mizuho Securities initiates coverage on Dominion Midstream Partners, LP (NYSE: DM) with a Buy rating and a price target of $30.00.
Analyst Brian Zarahn commented, "We are initiating coverage of DM with a Buy rating and $30 price target, based on the average of our $33 discounted cash flow model (9% discount rate) and $27 EV/Adjusted EBITDA (17x multiple in 2017) valuation methodologies. DM is a stable, high-growth natural gas infrastructure MLP with a strong parent. We expect DM to post 22% distribution CAGR to 2020, among the highest in the MLP sector. The Partnership has strong growth visibility with an approximate $2.5 billion EBITDA dropdown inventory, which is 23x DM 2Q16 run rate, from investment grade parent Dominion Resources. Even post-2020, $1.77bn EBITDA drop-down inventory will remain at the parent, providing further growth visibility. DM’s premium valuation is warranted due to its above-average growth rate, visibility, stability and exposure to demand-pull natural gas infrastructure assets. In addition, DM has a low cost of capital to finance its dropdown strategy."
Shares of Dominion Midstream Partners, LP closed at $23.50 yesterday.
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