UPDATE: Bank of America Merrill Lynch Initiates Buy On Sprague On CAGR And Kildair Decline

In a report published Wednesday, Bank of America Merrill Lynch initiated a Buy rating on Sprague Resources

and a price target of $22.00. In the report, Bank of America Merrill Lynch says "While SRLP has a medium-to-high business risk profile given its exposure to commodity prices, weather, and seasonality, we nonetheless believe SRLP units offer investors solid total return potential given a pro forma current yield of 9.5% (versus 6.0% for the AMZ index). We believe SRLP deserves to trade at a level commensurate with its expected mid-single-digit distribution CAGR, supported by the drop-down of Kildair. Our $22 PO is based on a 7.75% target yield on our 4Q14E annualized distribution of $1.70/unit." Sprague closed on Tuesday at $17.31.