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UBS Upgrades SE SE Shares at an Interesting Crossroad – Upgraded to Buy SE has long sported a premium valuation relative to peers despite its lower growth reflecting its history of execution & delivering on commitments. However, recently SE has been taken down in part due to the larger commodity fear overhang & GP stake in DCP LLC. At this cross road we see the following; 1) commodity market overhang is overstated given SE’s infrastructure being predominantly FERC regulated & long dated contracts; 2) continued reiteration no capital contributions to DCP; & 3) SE’s growth rate is unchanged ($1B of projects added to execution since 1Q) while GP peers have been forced to lower growth & projects. Given this & the steep discount to fair value, we upgraded SE to Buy from Neutral. While not factored into our numbers, mgmt. talked about M&A as goal on its 2Q call, and we note that, should SE use SEP as a currency, it could provide incremental material upside to SE cash-flows as a result of increased SEP units. |
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Msg # | Subject | Author | Recs | Date Posted |
54437 | Re: UBS Upgrades SE | Tex7779 | 2 | 8/28/2015 6:47:36 PM |