Analyst Actions: Spectra Energy Partners Coverage Assumed at Credit Suisse With Neutral, TP of $32

By Staff,

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1Q Tops CS Forecast But Growth Catalyst Remains Elusive; ASSUMING Coverage with a NEUTRAL Rating & TP of $32 (prev $31)

Assuming Coverage: We are assuming coverage of Spectra Energy Partners ( SEP ) with a Neutral rating and TP of $32.

1Q Results Top CS but Below Consensus: SEP reported 1Q12 EBITDA and DCF/unit of $84mm and $0.62/unit which was above CS's $68mm and $0.57/unit, respectively, but slightly below consensus.

$30mm in Growth Capex Won't Get It Done: SEP has guided to $30mm in growth capex for FY2012 which is unlikely to provide enough in the way of incremental cash flows to support increased distribution growth. With over $600mm in available liquidity at the end of 1Q, SEP is in a good position to make an acquisition similar to its $390mm acquisition of the Big Sandy pipeline last year. However, given somewhat elevated acquisition multiples, finding a highly accretive acquisition target could prove challenging, so we remain on the sidelines.

Maintain Neutral, TP to $32 (from $31): We maintain our Neutral rating and have raised our TP to $32 (from $31) as we roll forward our distribution outlook. We have assigned a 6.0%-6.50% yield target range for SEP which represents a 25 bp discount to the AMZ. Adding an estimated $1.97 in distributions over the next 12 months implies total return potential of 3%-11% which keeps us at Neutral. Using a three stage distribution discount model assumes a 1st stage 5-year distribution growth rate of 3.7%, 2nd stage 5-year distribution growth rate of 3.0%, and terminal growth rate of 1.5% supports our current TP.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2014 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing Commodities
Referenced Stocks: SEP

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