BMO: Enable Midstream 'Reasonably Valued'

Enable Midstream Partners LP ENBL, an owner, operator and developer of natural gas and crude oil infrastructure assets, is "reasonably valued" due to continued headwinds, according to BMO Capital Markets. 

The Analyst

Danilo Juvane initiated coverage of Enable Midstream Partners with a Market Perform rating and $14 price target.

The Thesis

Enable has performed well recently in a challenging commodity price environment, limited capital market access, and pipeline regulatory shifts, Juvane said in a Thursday initiation note. (See his track record here.) 

Yet the company is likely to continue seeing moderating volume growth in its gathering and processing business, which accounts for 65% of total EBITDA, the analyst said. 

The remaining 35% of EBITDA comes from the transportation and storage business, which faces uncertainty in terms of near-term contract renewals, he said. 

External headwinds include equity overhang from CenterPoint Energy, a general partner that owns around 54% of common units, Juvane said.

The company has a high degree of customer concentration, as 61% of all natural gas gathered volumes were delivered to just five customers; 51% of transportation and storage revenues also came from five customers, the analyst said.

If a main customer lowered its orders with Enable, it would negatively impact the company's financial position, he said. 

Enable shares are trading in-line with the peer group averages at 10.2 times 2020 EBITDA, which prices in multiple headwinds and upside potential of around 14%, according to BMO. 

Price Action

Enable Midstream Partners shares were trading higher by 1.08% at $13.15 at the time of publication Thursday. 

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