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|Subject: Re: first linn now KMP,KMR,KMI||Date: 9/6/2013 2:16 PM|
|Author: stillwater9999||Number: 16024 of 24958|
Both Deutsche Bank and Credit Suisse came out in defense yesterday:
John Edwards, the Master Limited Partnership analyst at Credit Suisse, reiterated his Buy rating on Kinder Morgan companies Thursday. He writes:
“We are reiterating our Outperform on KMP units and KMR shares and $97 target price based on a target yield of 5.75% applied to forecast distributions 12 months out. … The questions being raised regarding KMP’s treatment of maintenance capital and the valuation of KMP’s CO2 segment have been around for most of the nearly 11 years that we have been following the company. The argument being put forth once again is that KMP over distributes its cash flow by under-reporting maintenance capital. … Due to prior success and high returns, KMP kept investing in E&P and production has grown from ~11,000 bbl/d some in 2002 to ~50,000 barrels by 2005 and DCF has grown from ~$100mm in 2003, to ~$1,000mm expected for 2013 or ~19% of total segment 2013B EBDA. KMP has been consistent in how to account for growth vs maintenance capital over the years and has consistently delivered on its budgeted cash flow targets to investors over the last 12 years. Given Kinder’s impressive track record and transparency, investors (and us) have given KMP the benefit of the doubt with respect to the multiples applied to its E&P business.”
If it is a "house of cards" they must be using some pretty good glue. Distributions for KMP have increased from what I see every single year since 1992. I do not see anything in the current environment that would endanger the basic business. There is increasing demand for energy transport particularly from the areas where the new energy is being found (Canada, Dakotas etc.) to where it is needed.
My choice in this arena in recent years has been EPD. But that one has gotten pricey. I think the current price for KMP is a good one.
I have made so much money on these pipelines (ENB, TRP as well) both from distributions/dividends and capital appreciation over the last decades it would take a very large event for me to have any risk of losing any significant fraction.
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