Sees Plenty Of Organic Growth In Shell Midstream, Says UBS; Initiates Buy
In a research report sent to investors today, UBS analyst Shneur Gershuni reiterated a Buy rating on Shell Midstream Partners (NYSE:SHLX) with a price target of $40.00, which implies an upside of 12% from current levels.
Gershuni said, “Shell Midstream is a combination drop down and mid-single digit organic growth story. The MLP was started with ownership interests in four crude and refined product pipelines. These pipelines are expected to grow EBITDA in the mid-single-digits annually, driven by higher utilization, expansion projects and annual rate escalators. Additionally, the GP, SPLC has ~$1bn in EBITDA that can be dropped to the MLP and there are additional midstream assets at Royal Dutch Shell that can be dropped. Over 50% of SPLC’s business is with third parties, reducing the dependence of SPLC and SHLX on Royal Dutch Shell.”
The analyst continued, “We expect Shell will drop assets to SHLX faster than necessary to drive a 25.7% distribution growth CAGR 2015-2018. Our confidence in this growth rate is arrived by management comments indicating that it plans to meet or beat distribution growth at MPLX, PSXP, and VLP. Current UBSe and Consensus show average 3-Yr distribution CAGR of 25.4% for these MLPs.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Shneur Gershuni has a total average return of -7.0% and a 47.8% success rate. Gershuni is ranked #3106 out of 3377 analysts.