Mizuho Securities Starts Energy Transfer Partners (ETP) at Buy
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Mizuho Securities initiates coverage on Energy Transfer Partners (NYSE: ETP) with a Buy rating and a price target of $45.00.
Analyst Brian Zarahn commented, "We are initiating coverage of ETP with a Buy rating and $45 price target, based on the average of our $49 discounted cash flow model (10.5% discount rate) and $41 EV/Adjusted EBITDA (11x multiple in 2018, discounted 1 year to 2017) valuation methodologies. We believe ETP offers an interesting risk-reward value proposition with as the only investment grade MLP with double-digit yield and visibility on distribution coverage improvement from gas, NGL and crude infrastructure assets entering service through year end 2017. Distribution coverage improvement is supported by more than $1 billion general partner reductions and contributions from $9 billion organic projects entering service 2H16-2017. Though the Dakota Access crude pipe project is currently in regulatory limbo, we assume the project is approved though in-service date will likely be later than expected. Longer term, ETP’s high general partner splits are a headwind for future distribution growth, but at an 11% yield, we expect price appreciation from gradual yield compression (multiple expansion) from distribution coverage improvement."
Shares of Energy Transfer Partners closed at $37.36 yesterday.
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