UPDATE: Morgan Stanley Initiates Coverage on QEP Midstream Partners LP with Equal-Weight Rating, $25 PT on Balanced Outlook

In a report published Tuesday, Morgan Stanley analyst Stephen J. Maresca initiated coverage on QEP Midstream Partners LP QEPM with an Equal-Weight rating and $25.00 price target. In the report, Morgan Stanley noted, “QEPM is well structured with fee-based contracts, visible growth opportunities via drop-downs, and an unlevered balance sheet. Furthermore, QEP has incentives to grow the partnership to pay down debt, free up drilling capital, and improve valuation. This, combined with the benefits of QEPM being an early stage partnership (low EBITDA base, low GP burden), positions QEPM to deliver low- to mid-double-digit distribution growth (MSe 3-year CAGR of 13.7%) and a solid total return. However, we acknowledge execution risk due to 1) potential cash flow risk around the base business given limited volumetric protection 2) the readiness of certain assets at QEP to drop down to QEPM.” QEP Midstream Partners LP closed on Friday at $22.65.