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Barclays still believes Energy Transfer Partners LP (NYSE: ETP) offers "safe yield and growth prospects" for 2018 and beyond.
The brokerage, which has an Overweight rating on Energy Transfer Partners, said the firm would benefit from "$10 billion of organic projects under execution," of which Barclays estimates "$4.5 billion is left to spend in 2016/2017."
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MLP Projects
"We see these projects adding close to $1 billion of DCF by 2019. While we forecast debt to EBITDA to remain around 4.5x in 2016, we see this falling to low 4x in 2017+, which we think will help valuation," analyst Heejung (Helen) Ryoo wrote in a note.
Ryoo noted that Energy Transfer Partners continues to trade at a discount to key NGL players such as Oneok Partners LP (NYSE: OKS), DCP Midstream Partners, LP (NYSE: DPM) and Targa Resources Corp (NYSE: TRGP).
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Analyst's Take
According to the analyst, Energy Transfer Partners' current yield of 11.82 percent reflects a 320 bps discount to this group, while its 2016/17E EV/EBITDA of 11.8x/9.9x reflects a 2.5–3.5x turn discount to the group.
The analyst, who raised the price target to $48, highlighted "the start up of the Lone Star Express project in 2016 will bring 180–280 m b/d of new NGL pipeline capacity." Ryoo sees a $240 million–$260 million EBITDA benefit from Lone Star, which assumes a gradual ramp up of contracted volume over the next four years.
Ryoo also said Frac IV adds 120 m b/d new capacity in Mont Belvieu by end of the year.
"These projects position ETP well in capturing volume upside from ethane recovery expected when new crackers come on line in 2017-2019," Ryoo noted.
"While some of the NGL players in the MLP space have seen their stock valuation reflect this expectation, ETP has not, in our view. Consequently, ETP's valuation remains attractive to its NGL peers in both yield and EV/EBITDA metric," the analyst added.
At time of writing, Energy Transfer Partners LP was trading up 3.78 percent at $37.04.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.