Famed investor Leon Cooperman gave a shout out to Atlas Pipeline Partners (APL) on CNBC's Power Lunch today. APL fits right in to my theme that these types of energy infrastructure investments are good plays for your income portfolio over the next few years. This is primarily as we are in the early innings of building out our infrastructure necessary to deliver the expanding oil, natural gas and natural gas liquid production happening domestically. In addition, it appears that the tax treatment of these investment vehicles looks likely to remain intact. Atlas has several things going for it at these levels.
Key recent positives for Atlas:
- Atlas Pipeline Partners completed its acquisition Cardinal Midstream for $600M in late December. APL also boosted its 2013 EBITDA guidance to $310M-$360 from $250M-$300M as result of the acquisition. APL expects the deal to be immediately accretive to distributable cash flow per unit by 3%-5% in 2013 and 8%-10% in 2014.
- Another positive on the acquisition was that S&P raised its rating on Atlas' senior unsecured debt as the enterprise will be stronger as result of the pickup.
- In addition the positive comments from Leon Cooperman, the shares were also initiated as an "Outperform" at Robert W Baird in mid-December.
- After falling for months, consensus earnings estimates for FY2013 have added a nickel a share in the last month.
Atlas Pipeline Partners, L.P. gathers, processes and transports natural gas from its network of approximately 9,100 miles of intrastate natural gas gathering systems, numerous gas processing plans and few thousand miles of Natural Gas Liquid pipelines.
4 additional reasons APL is good income addition at $32 a share:
- APL yields over 7% (7.2%) and has a series of nice distribution hikes over the past two years. The additional cash flow from the Cardinal acquisition should be positive for future distribution payment hikes.
- One of the best ways to evaluate this type of play is to look at how it has done in growing operational cash flow. Atlas has almost tripled this metric over the past three years.
- The five analysts that cover the stock have a median price target of $40 a share in a tight range (low target: $39 a share, high target: $42 a share). Good potential capital appreciation potential on top of the 7% yield.
- With the Cardinal purchase, revenues should increase more than 50% in FY2013.