Energy Transfer (ET), mcap=$35.6bn, price $11.54 vs $10.31

$ET pitch:
– MLP, the largest owner of energy transportation assets in the country.
– The market is wrong in valuing ET as if its cash flows are going to be in rapid decline – in fact, the company is positioned to meaningfully grow its already high (25%) cash flow yield.
– Expected to re-rate on the back of stabilizing CAPEX and market starting to appreciate cashflow inherent in the company.
– Stable revenue stream with built-in inflators tied to PPI.
– The global demand for hydrocarbons continues to grow and is expected to do so for at least the next 10 years.
– The US has some of the best combinations of infrastructure, and quality rock, and is not a war-torn country, political basket case, or nationalization risk.
– And ET with its unparalleled breadth and scale is exposed to all these positive trends with its comprehensive network of infrastructure.

$ET valuation:
– Historically ET traded at a 7% DCF yield, it is now trading at 25%.
– Expected to do over $14bn of EBITDA in 2023.
– At a historical multiple of 15x that is $47 per unit.
– At 9x, the low end of comps in the current depressed environment, is $20 per unit.

Exp. gain: +150% to $25/share in a year.

Full $ET write-up (free guest account required):

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