UBS Cuts Price Target on Buckeye Partners (BPL) to $86; Reiterates Buy
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UBS maintained a Buy rating on Buckeye Partners (NYSE: BPL), and cut the price target to $86.00 (from $88.00), following the company's 3Q and recently announced VTTI Acquisition. Management expects the transaction will be immediately accretive and sees strategic value and opportunity to extend its global platform of terminaling assets. For 3Q, BPL reported Adjusted EBITDA of $271.6mm above consensus by 11%.
Analyst Shneur Gershuni commented, "Post close of equity and debt financing for BPL’s recently announced agreement to acquire a 50% equity interest in VTTI for $1.15bn, we are updating estimates. Mgmt expects the transaction will be immediately accretive and sees strategic value and opportunity to extend its global platform of terminaling assets; however, it expects the purchase price to fall to 10x over time (we estimate it was initially acquired at 12.5x EV/EBITDA) vs. current BPL multiple of 13.4x ’16E. While initially dilutive from a leverage standpoint which is a negative in our three-pronged valuation methodology (rating agencies will use proportional consolidation taking leverage above 4x net debt/EBITDA), over time this acquisition has potential as the expected improvement in EBITDA can help returns as well as the stake in the IDRs."
Shares of Buckeye closed at $63.64 yesterday.
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