Mizuho Securities Starts NuStar GP Holdings (NSH) at Neutral
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Mizuho Securities initiates coverage on NuStar GP Holdings (NYSE: NSH) with a Neutral rating and a price target of $26.00.
Analyst Brian Zarahn commented, "We are initiating coverage of NSH with a Neutral rating and $26 price target. Our $26 price target is based on the average of our $24 discounted cash flow model (10.25% discount rate) and $27 EV/Adjusted EBITDA (12.75x multiple in 2017) valuation methodologies. NSH offer a healthy yield of 8.3%, one of the highest among general partner peers. We believe the distribution is safe, supported by relatively stable, fee-based transportation and storage cash flows generated by underlying MLP NuStar Energy (NS). However, NSH’s high distribution yield is largely attributable to an expected below-average distribution growth rate (we do not forecast NSH or NS to post distribution growth until 2019) and a 25% incentive distribution cap vs. 50% for most other GPs. However, for patient, income-oriented investors, NSH provides a robust yield with upside potential from future NS equity issuance or distribution bumps."
Shares of NuStar GP Holdings closed at $25.50 yesterday.
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