UPDATE: Morgan Stanley Initiates Coverage on Rose Rock Midstream LP with Equal-Weight Rating, $42 PT Following Spinout from SEMG

In a report published Wednesday, Morgan Stanley analyst Stephen J. Maresca initiated coverage on Rose Rock Midstream LP

with an Equal-Weight rating and $42.00 price target. In the report, Maresca noted, “Built in drop down growth on a small base. SEMG plans to drop down its remaining assets to RRMS over the next 3-5 years. Largely a fee-based business mix (~87%) with some contractual volume commitments on new storage (5-7 years in tenure) and pipelines. Parent support to help finance projects and generate growth opportunities. Strong balance sheet position and healthy coverage ratio. Assets are well positioned in some of the most attractive basins creating potential growth opportunities and limiting the risk from commodity weakness.” Rose Rock Midstream LP closed on Tuesday at $39.00.