Credit Suisse says: "SE Dropdown Blockbuster 15-20% Accretive
Year 1; Revising Ests & TP to $44.00 (from $38.50)."
All US Transmission and Storage Assets to Drop Down by YE2013:
"Spectra Energy Partners' (
) corporate parent and owner of its GP, Spectra Energy (
), announced it would drop down all of its remaining US
Transmission and Storage assets to SEP by year-end 2013. We have
updated our estimates to reflect the accretion from this
We Estimate ~20% Accretion to SEP Unitholders in 2014: "We have
assumed ~$950mm of EBITDA from $10.5B of assets to be dropped to
SEP i.e. a ~11x multiple. We have also assumed maintenance cap ex
of ~25-26% of EBITDA. We have continued to assume a 2Q:14 drop of
another 50% of Express Platte following the 50% interest which is
due to close July 1, 2013. Further, we now expect growth projects
announced at the SE level to be carried out at the SEP level we
have modeled ~$6B of the $10B in identified opportunities is
invested through 2017 at a 7x multiple of EBITDA."
Raising TP by $5.50, to $44: "We are raising our TP to $44 (from
$38.50) by applying a 3-stage DDM with 9% and 5.4% distribution
growth for the first and second 5-year periods followed by a 1.5%
terminal growth rate, discounted at 9%. This translates to a target
yield range of 4.70%-5.25% or 12-month valuation range of
$42-$46/unit and total return potential of 12-23%, close to a
ratings upgrade. We will hold at Neutral for now awaiting either a
pull-back in the unit price or updates from management when it
plans to discuss details at its 2Q:13 results call scheduled for
August 6. We are revising our 2013/2014/2015 EPU estimates to
$1.60/$2.35/$2.78 (from $1.64/$1.81/$1.73) respectively."
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