Initiating Coverage on Modestly Undervalued DCP Midstream; We Like Its DJ Basin Position
We are initiating coverage of DCP Midstream with a fair value estimate of $47 per unit and no-moat and stable trend ratings. Our fair value estimate implies a 2019 enterprise value/EBITDA ratio of 9 times and a 2019 distribution yield of 6.6% as the partnership reports it. If we include both limited partner and general partner distributions in the distribution payout, as peers do, our yield increases to close to 10%. Adjusting for the general-partner take rate, our 2019 EV/EBITDA ratio is 11.8 t...DCP Midstream is a limited partnership that owns, operates, acquires and develops a portfolio of midstream energy assets. The company's operations are organized into two reportable segments: Logistics and Marketing and Gathering and Processing. The company's Logistics and Marketing segment includes transporting, trading, marketing and storing natural gas and natural gas liquids (NGLs), fractionating NGLs and wholesale propane logistics. The company's Gathering and Processing segment consists of gathering, compressing, treating, and processing natural gas, producing and fractionating NGLs, and recovering condensate.
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