UPDATE: Credit Suisse Starts DCP Midstream (DPM) at Outperform, Distribution Growth Expected to Triple
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Price: $37.60 +1.08%
Rating Summary:
3 Buy, 12 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
3 Buy, 12 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Credit Suisse initiated coverage on shares of DCP Midstream Partners LP (NYSE: DPM) with an Outperform rating and $45 price target.
The firm said the Outperform rating is due to the company's attractive current yield of 6.1%, its three-year distribution CAGR of 5.3%, and its ~17% upside potential when compared to its price target.
Credit Suisse comments that DPM has a good long-term growth strategy given its sponsor's growth profile and large portfolio of assets which can be sold to DPM over time. The firm also likes the investment-grade balance sheet and liquidity that enables DPM to fund acquisitions and expansion projects, and primarily fee-based or hedged margins that mitigate commodity price exposure.
DPM outlined a $700 million capex budget for 2011, but the firm believes that given its footprint and focus in liquids-rich areas, additional growth opportunities do exist. DCP will drive the growth for DPM as Credit Suisse expects DCP to increasingly use DPM as an attractive alternate funding vehicle.
Distribution growth is subject to substantial growth from its 1.6% rate in 2010 to 5-7% annually starting in 2011. The firm anticipates that this will be accomplished through acquisitions and organic expansion projects.
The firm said the Outperform rating is due to the company's attractive current yield of 6.1%, its three-year distribution CAGR of 5.3%, and its ~17% upside potential when compared to its price target.
Credit Suisse comments that DPM has a good long-term growth strategy given its sponsor's growth profile and large portfolio of assets which can be sold to DPM over time. The firm also likes the investment-grade balance sheet and liquidity that enables DPM to fund acquisitions and expansion projects, and primarily fee-based or hedged margins that mitigate commodity price exposure.
DPM outlined a $700 million capex budget for 2011, but the firm believes that given its footprint and focus in liquids-rich areas, additional growth opportunities do exist. DCP will drive the growth for DPM as Credit Suisse expects DCP to increasingly use DPM as an attractive alternate funding vehicle.
Distribution growth is subject to substantial growth from its 1.6% rate in 2010 to 5-7% annually starting in 2011. The firm anticipates that this will be accomplished through acquisitions and organic expansion projects.
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