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Wunderlich has upgraded NGL Energy Partners LP (NYSE: NGL) to Buy from Hold, on a potentially sizable distribution step-up in FY18 and reasonable valuation.
"NGL's Refined Products business should continue to outperform given increasing motor fuels demand and relatively low prices, while a reversion to the mean of winter weather should benefit Retail Propane," analyst Jeff Birnbaum wrote in a note.
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The analyst noted that excess cash flow and acceptable leverage should offset headwinds in water volumes and crude marketing. In addition, "stabilization in WTI prices should provide a basis to collect on Grand Mesa volumes and cash flows," added Birnbaum.
Birnbaum, who expects greater than $150 million in excess cash flow/year, further sees potential upside from Oaktree's partnership with NGL. Furthermore, GP currency could be a valuable tool in attracting additional Oaktree involvement.
The analyst also raised the price target to $20 from $13.
"Our $20 price target equates to ~10.5x FY17E LP EBITDA, or a 9.4 percent yield on forecast average FY17/FY18 distributions/unit of $1.56/$2.18, and would generate a 15 percent total return on the FY17E distribution," Birnbaum added.
At the time of writing, shares of NGL were up 1.98 percent at $19.05.
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.