Wunderlich Securities Initiates Coverage on Vanguard Natural Resources (VNR) with a Buy; Strong Hedge Book

October 9, 2009 8:31 AM EDT

Wunderlich Securities initiates coverage on Vanguard Natural Resources (NYSE: VNR) with a Buy. Price target $18.50

Wunderlich analyst says, "VNR is a small capitalization upstream oil and gas LLC, headquartered in Houston, which avoids entity-level income tax under Section 7704 of the internal revenue code as a publicly traded partnership. Our bearish near-term outlook on natural gas is offset by Vanguard's strong hedge book that we expect will bridge the firm into a more normalized gas price environment in 2011 in which VNR and other upstream MLPs should thrive."

"The current dividend distribution of $2.00 annualized drives an 11.9% yield, which we believe is highly secure based on the hedge book. In our view, upstream MLPs are moving from a value-oriented, reserve-based valuation to a more favorable yield-based valuation, hence our inclusion of, and focus on, a dividend discount model and discounted free cash flow ($27.88) in valuation."

To see more analyst ratings on VNR Click Here.

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• Wunderlich Securities
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