UBS Raises Price Target Following EnLink Midstream Partners (ENLK) Feedback Questions
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UBS reiterated a Buy rating on EnLink Midstream Partners (NYSE: ENLK), and raised the price target to $20.00 (from $19.00), after addressing feedback questions.
Analyst Shneur Gershuni commented, "Assuming the same YOY decline rate through 2018 as in 3Q16, cash flow from North Texas should decline to ~$81MM/qtr in 2018 from $90MM/qtr in 3Q16. ENLK plans to add a 120MMcf/d plant in the Permian (50/50 JV) this year and a 200MMcf/d plant in the STACK in 1H2017, which should increase EBITDA by ~$12MM/qtr more than offsetting. Additionally, ENLK should benefit from operating leverage at current plants in the Permian and STACK as well as lower ethane rejection in 2017/18. Management has been focusing on potential asset sale to fund the first installment payment of $250MM in 1Q17 (in particular the sale of its interest in Howard Energy Partners), but also mentioned potential to use traditionally funding sources ATM and debt as well as also has the option from the original agreement to issue additional preferred equity to TPG/Goldman. If ENLK doesn’t sell its interest in Howard Energy Partners, we expect ENLK will likely issue the preferred equity to fund the 1st installment payment. We expect all series B preferred units will be converted to common units in 3Q17, which we estimate will lower 3Q17 coverage to 1.04x, down from 1.14x in 2Q17."
Shares of EnLink Midstream Partners closed at $17.39 yesterday.
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