UPDATE: Credit Suisse Initiates Coverage on Valero Energy Partners
In a report published Monday, Credit Suisse analyst John Edwards initiated coverage on Valero Energy Partners (NYSE: VLP) with a $38.00 price target.
“Based on our expectations, VLO's extensive portfolio of transportation and logistics assets translates to ~$600mm in annual EBITDA. VLP is set to be the direct beneficiary of these assets that closely complement its existing base business, which currently generates ~$55-60mm EBITDA,” the report said.
According to the report, the $38.00 price target is derived by applying a combination of a three-stage distribution discount model (DDM) and target yield, giving us a valuation range of $35-$42. The price target also implies a yield of 2.76 percent in a 4Q14 (12 months out), based on a forecast annualized distribution of $1.05 per unit and implies a 12-month total return potential of ~20 percent with bias to the upside, inline with the analysts Outperform-rated energy logistics MLPs.
Some highlights from the report included:
-”VLP priced its IPO at $23/unit at a yield of 3.70% (based on MQD), one of the lowest among MLPs.” -”VLP's assets (at IPO) are critical to VLO's refining operations, which support its Port Arthur, McKee, and Memphis refineries.”
VLP closed Friday at $32.60.
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