Mizuho Securities Starts Enterprise Products Partners (EPD) at Buy
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Mizuho Securities initiates coverage on Enterprise Products Partners (NYSE: EPD) with a Buy rating and a price target of $32.00.
Analyst Brian Zarahn commented, "We are initiating coverage of EPD with a Buy rating and $32 price target, based on the average of our $35 discounted cash flow model (8.75% discount rate) and $29 EV/Adjusted EBITDA (14.75x multiple in 2017) valuation methodologies. EPD is a diversified, investment grade, midstream MLP with above-average cash flow stability, competitive, consistent growth rate, high distribution coverage and exposure to themes of demand-pull infrastructure and exports. High cash flow stability is supported by largely fee-based cash flows generated from a strategically located integrated midstream asset base serving both energy producers and domestic/international consumers. Stability also evidenced by BBB+ credit rating, which is the highest in the MLP sector. We expect EPD to post 5% distribution growth with healthy 1.3x distribution coverage over the next 3 years, quite competitive for a large cap MLP. Growth visibility supported by $10 billion of organic projects (36% NGL, 31% petchem, 33% crude) entering serving 2015-18 and a low cost of capital with no general partner IDRs. With a $57 billion market cap, EPD is the largest and most liquid MLP. For the above reasons, we believe EPD deserves its premium valuation and offers an attractive risk-adjusted value proposition."
Shares of Enterprise Products Partners closed at $27.42 yesterday.
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