UPDATE: Credit Suisse Initiates Phillips 66 Partners LP with Outperform on Good Market Position
In a report published Monday, Credit Suisse analyst John Edwards initiated coverage on Phillips 66 Partners LP (NYSE: PSXP) with an Outperform rating and $40.00 price target.
In the report, Credit Suisse noted, “We are initiating coverage of PSXP with an Outperform rating and a $40 target price. PSXP is set to be logical beneficiary of Philips 66's (PSX) growing transportation and midstream infrastructure, which we expect to translate to ~$800 in visible dropdown EBITDA, compared to ~$70-75mm EBITDA for its existing base business. Best-in-Class MLP Distribution Growth: PSXP priced its IPO at $23/unit at a yield of 3.70% (based on MQD), one of the lowest among MLPs. Post IPO, PSXP is well positioned to drive long-term high double digit distribution growth, given (1) ~$800mm in visible dropdown EBITDA from its sponsor; (2) a de-risked, stable cash flow business model; and (3) zero debt and substantial cash on hand, which we believe will be sufficient to fund its initial dropdown. We expect a three-year distribution CAGR of ~22% for PSXP. Closely Integrated with Investment-Grade Sponsor: PSXP is integral to its parent PSX's business, as (1) its initial (IPO) assets support the refining and marketing operations of PSX's Lake Charles, Sweeny, and Wood River refineries; (2) ~85% revenues are backed by minimum volume commitments by PSX; and (3) it's a primary growth/financing vehicle for PSX's expanding transportation and midstream business.”
Phillips 66 Partners LP closed on Friday at $32.32.
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