Energy
Despite Huge Sell-Off, MLPs Are Expensive: 3 Top Credit Suisse Picks
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After almost two years of a downward spiral in oil prices, and a commensurate fall in the prices of energy master limited partnerships (MLPs), one would certainly think that the sector would be cheap, especially when compared the Dow Jones Utility Index, which has been hitting all-time highs. A new and very extensive research report from John Edwards and his team at Credit Suisse makes the case that sector is actually slightly expensive now to utilities.
The Credit Suisse analysts note that once again enterprise value to EBITDA showing relative indifference to distribution policy is being resurrected as a way to look at the sector. They also cite stronger distribution coverage and what they term as “thicker equity coverage” as keys to surviving wicked cyclical downturns, especially given the sector’s strong correlation to oil pricing.
Three companies are touted at the top picks at the firm, and all are rated Overweight. They are cited for their defensive characteristics, and ability to have offensive qualities should oil stay in the $30s.
EQT Midstream Partners
This company comes in as a top midstream play at Credit Suisse. EQT Midstream Partners L.P. (NYSE: EQM) is a growth-oriented partnership formed by EQT Corporation to own, operate, acquire and develop midstream assets in the Appalachian Basin. The partnership provides midstream services to EQT and third-party companies through its strategically located transmission, storage and gathering systems that service the Marcellus and Utica regions. The partnership also owns 700 miles and operates an additional 200 miles of FERC-regulated interstate pipelines. It it also owns more than 1,600 miles of high- and low-pressure gathering lines.
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