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  • Wunderlich initiated coverage of Landmark Infrastructure Partners LP LMRK on Tuesday.
  • Analyst James L. Dobson issued a Buy rating and a $20 price target for the stock, which implies an upside potential of more than 20 percent from current stock prices.
  • Shares of this MLP are up more than 1.8 percent on Tuesday trading.
  • Landmark Infrastructure is structured as a master limited partnership, a recent Wunderlich research note explained. Its cash flow is produced by “triple-net leases of real estate assets underlying cell tower, outdoor advertising, and renewable energy infrastructure in the U.S.”

    According to the report, the firm is modeling distribution growth of 10 percent per year through 2017 -- without the necessity to attain new equity via the public markets until the third quarter of 2016.

    Moreover, its distributable cash flow projection supports an average distribution coverage of 1.0x through 2017.

    Related Link: There Might Be Some Good News For MLP ETFs

    Landmark Infrastructure's Advantages

    The analyst noted that Landmark has “a good management team and a strong sponsor with ample dropdown capacity,” which could make the Wunderlich’s distribution growth projection conservative.

    In this backdrop, the shares seem to be attractively priced in relation to peers; this supports the firm’s Buy rating.

    The report went on to highlight five key points to take into accounts when investing in the company:

    • 1) Landmark has no direct or indirect financial exposure to the energy sector. This provides it with a unique position among MLPs.
    • 2) Current trends support supplementary growth of real estate for infrastructure use; this specific MLP is particularly well positioned to benefit from this.
    • 3) The company continuously invests in acquisitions and is expected to continue to do so. “This coupled with the fragmented nature of the business should provide ample growth opportunity for LMRK. This could accelerate if LMRK's cost of capital improves toward levels similar to peers,” Dobson expounded.
    • 4) Revenue growth should drive 10 percent distribution growth with a 1.0x coverage ratio through 2017.
    • 5) The firm sees a potential return of 40 percent or more. The stock “currently trades at an 8.0 percent distribution yield and an enterprise value to EBITDA multiple on 2016 estimates of 12.2x,” Dobson added.

    Disclosure: Javier Hasse holds no stakes in any of the securities mentioned above.

    Image Credit: Public Domain
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    Posted In: Analyst ColorLong IdeasPrice TargetInitiationTop StoriesAnalyst RatingsTrading IdeasReal EstateJames L. DobsonMLPWunderlich
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