UPDATE: Goldman Sachs Starts SemGroup (SEMG) at Buy
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(Updated - August 25, 2016 9:34 AM EDT)
Goldman Sachs initiated coverage on SemGroup (NYSE: SEMG) with a Buy rating and a price target of $39. Analyst Jerren Holder highlighted compelling yield, visibility on growth and attractive valuation. He also thinks investors are underappreciating White Cliffs pipeline's potential. .
Holder explained, "We believe SEMG offers investors a compelling yield (5.7%) plus growth (8% CAGR through 2019) value proposition in a C-Corp structure. We believe the market may be underappreciating the potential for SEMG’s largest asset by EBITDA, White Cliffs pipeline, to deliver strong volumes post-2017 as Niobrara production growth accelerates. We believe the completion of the Maurepas Pipeline on the US Gulf Coast will significantly reduce the overall risk profile of SEMG due to the asset’s multi-decade 100% take-or-pay agreement with Motiva."
"SEMG trades at an inexpensive valuation relative to peers on yield (5.7% vs 4.8% peer avg), 2017E EV/EBITDA (10.7x vs 13.0x peer avg) and 2017E P/DCF multiples (10.8x vs 13.1x peer avg)," added the analyst.
Shares of SemGroup closed at $30.66 yesterday.
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