Mizuho Securities Starts Shell Midstream Partners, L.P. (SHLX) at Buy
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Mizuho Securities initiates coverage on Shell Midstream Partners, L.P. (NYSE: SHLX) with a Buy rating and a price target of $37.00.
Analyst Brian Zarahn commented, "We are initiating coverage of SHLX with a Buy rating and $37 price target. Our $37 price target is based on the average of our $40 discounted cash flow model (8.75% discount rate) and $34 EV/Adjusted EBITDA (17.5x multiple on 2017) valuation methodologies. SHLX is a high-growth, low-risk crude oil and refined products pipeline MLP with highly visible growth prospects, stable cash flows and an investment grade parent. The Partnership is well positioned to meet our 24% distribution growth CAGR (highest in our coverage universe) due to by a significant drop down inventory of $3.5 billion or 11x 2Q16 run rate EBITDA. High stability is supported by long-term contracts with a diverse customer base. Premium valuation is warranted due to strong growth visibility and stability. On PEG-like ratio of DCF multiple/growth, SHLX valuation is reasonable at 0.8x."
Shares of Shell Midstream Partners, L.P. closed at $31.35 yesterday.
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