UPDATE: Morgan Stanley Initiates Western Gas at Overweight on Long-Term Potential

Morgan Stanley initiated overage on Western Gas

with an Overweight rating and a $36 price target. Morgan Stanley said, "WGP offers leverage to WES's 15%+ distribution growth through ownership of the GP units and incentive distribution rights. Despite WGP's owning ~45% of the LP units, we still see a growth trajectory of 36% (4Q/4Q), 33%, 30% in 2013-15, implying a growth multiplier 2x+ as WES recently entered the 50/50 splits (sweet spot for GP growth). WGP's 32% distribution growth CAGR over the next three years compares favorably to other GPs under our coverage (MLPs and C-Corps) at 19% growth. Also, we see lower risk and better sustainability to the outlook than at peers." Western Gas closed at $47.63 on Wednesday.