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

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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 The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Commodities

Referenced Stocks: SEP

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