Credit Suisse initiates with an Outperform, $22 Target Price:
"We initiate coverage of SunCoke Energy Partners with a target
price of $22, providing a 7.5% yield. We believe that given the
various avenues for unit distribution growth (additional dropdowns,
new plant, M&A), 7-10% CAGR is possible to 2017."
Company Overview: "SunCoke Energy Partners is a Master Limited
), which manufactures metallurgical coke used in the blast furnace
production of steel. SXCP owns a 65% interest in two entities,
Haverhill and Middletown located in the Midwest (one in Haverhill,
Ohio and the other in Middletown, Ohio), with total annual capacity
of 1.7m tons."
Positives: (1) Stable Cash Flows Provide Yield Security: While
many MLP investors are unfamiliar with the industry, we believe the
inherent stability of the cokemaking business, plus the 5 year
guarantee from the parent provide a steady, reliable cash flow
stream which is underappreciated, (2) Visible Growth in the
Pipeline: We believe that SXCP has 3 levers of growth it may
utilize over at least the next 5 years, (i) dropdowns of existing
facilities, (ii) dropdowns of other SXC facilities, (iii) new build
capacity and M&A (both longer-term drivers), (3) Valuation:
SXCP is trading at a discount to its peer MLP comps, currently
trading at a yield of 8.0% and 5.1x EV/EBITDA our 2014 estimate, as
against an average yield of 6.0% and 11.3x 2014 EV/EBITDA of its
peers. We believe this discount is unwarranted.
Risks: "Operating risks, early termination rights for AKS,
potential labor disruption, and customer concentration risk.
Catalysts: 2013-earnings and approval of new Kentucky facility (for
C-corp); 2014-additional dropdowns of SXC facilities."
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