UPDATE: Bank of America Initiates MPLX LP at Buy on Valuation, Risk Profile

Bank of America initiated coverage on MPLX LP

with a Buy rating and a $32 price objective. Bank of America commented, "MPLX trades at a discount to peers on an adjusted EV/EBITDA basis, which we see as unjustified given its potential to provide peer-leading distribution growth through drop-downs from its general partner (GP), MPC, and the low business risk profile of its asset base. Incorporating approximately $900mn in drop-downs through 2014, we forecast MPLX will grow distributions at a 25% CAGR through 2014E while maintaining DCF coverage of at least 1.1x. … We think MPLX's underlevered balance sheet and attractive cost of equity capital should help facilitate accretion from potential asset drop-downs. We also see MPLX's feebased contracts and minimum volume commitments (MVCs) from MPC as lowering its business risk profile." MPLX LP closed at $27.05 on Monday.