Morgan Keegan Raises Target on ETP

JOHN EDWARDS, Morgan Keegan (07/19/2010)
"We are increasing our Q2, FY10, and FY11 estimates as we head into Q210 earnings season on prospects for higher basis and the recent announcements regarding the expansion of the Tiger Pipeline. Q210 EBITDA goes up by $9MM, to $318MM, Q210 DCF rises by $0.04, to $0.52/unit. FY10E EBITDA rises by $66MM to $1.587B and FY11 EBITDA rises by $102MM, to $1.82B. . .We are looking for ETP units to trade in a range of 7.0%–7.5% yield implying a $49–$51 value, providing total return in the 4%–10% range over the next year, including distributions. Maintain Market Perform.

ETP has often traded at a premium (lower yield) to the AMZ over the last three years [and] appears to have benefited from a 'flight to quality' phenomenon during the credit crisis of late 2008 as investors assigned value to ETP's relatively large size (for an MLP) and investment-grade rating. . .Of the 15 LP MLPs that continue to pay distributions but have not increased its distribution over the past four quarters, ETP is by far the largest with a market cap of $9.5B with the next largest being Linn Energy (LINE) at $4.2B—meaning investors are not assigning as much 'value' to ETP's relatively large market cap."

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