UPDATE: Citigroup Upgrades PAA Natural Gas Storage LP to Buy, Raises PT
In a report published Monday, Citigroup upgraded its rating on PAA Natural Gas Storage LP (NYSE: PNG) from Neutral to Buy, and raised its price target from $18.50 to $20.00.
Citigroup noted, “We are upgrading PNG to Buy and increasing our target price to $20.00. Our TP assumes PNG can increase the annual distribution to $1.49/unit 12 months from now and that units trade at a 7.5% yield (7.75% previously). Units have traded down ~11% over the past month on Fiscal Cliff and taxation worries, resulting in units currently trading at a ~7.8% yield and presenting an attractive buying opportunity for an MLP with a significant amount of cash flows supported long-term contracts, a strong and supportive general partner (GP), and industry leading low-cost gas storage expansions that should offset margin declines as contracts roll off into a low summer-winter spread environment – a result of excess supply from production growth outpacing demand growth that has dampened natural gas price volatility.”
PAA Natural Gas Storage LP closed on Friday at $18.25.
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