Seeking Alpha

Morgan Stanley sees limited Kinder Morgan distribution growth upside

  • Kinder Morgan Partners (KMP -0.8%) is reiterated with an Underweight rating and $82 price target at Morgan Stanley, which says it can't see KMP outperforming peers on distribution growth that is below the industry average.
  • Acknowledging KMP's cash flow stability from quality pipeline assets and geographic diversity, the firm sees accretion via projects and acquisitions as limited by a large asset base and a high general partner cash incentive share (45%-plus) which caps distribution growth upside.
  • The firm says KMP's oil production business (15%-20% of cash flow) creates material future asset/reserve replacement risk, and dropdowns from KMI (into KMP and EPB) likely will be finished by 2014, creating the need to continue to develop new organic projects.
  • KMI +1.2%, KMR +0.5%, EPB +2.2%.
Comments (16)
  • jwestman
    , contributor
    Comments (9) | Send Message
     
    Morningstar does not agree. Their new report is out today as well and they site Rich Kinder's statements addressing growth head on.
    17 Apr, 01:04 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5778) | Send Message
     
    Morgan Stanley owns 1.43M shares of (KMP).
    What do they stand to gain from this "underweight" rating?

     

    See who else owns shares here:
    http://on-msn.com/1hQ8vsz

     

    An opportunity to buy more shares perhaps?

     

    What a dirty business.
    17 Apr, 01:25 PM Reply Like
  • lau56806
    , contributor
    Comments (37) | Send Message
     
    KMP is rated four star by Morningstar. On the institution ownership, JP Morgan owns more than 6 million shares of KMP.
    17 Apr, 09:24 PM Reply Like
  • Sumflow
    , contributor
    Comments (3641) | Send Message
     
    That was last year, a lot has changed since then. Even then Morgan Stanley had sold almost 5% during the quarter. How can you depend on such old data?
    17 Apr, 10:18 PM Reply Like
  • Alex2322
    , contributor
    Comments (322) | Send Message
     
    Yeah they only make it underweight so they can buy more at lower prices!
    17 Apr, 01:32 PM Reply Like
  • hhmcdon
    , contributor
    Comments (203) | Send Message
     
    I may be dumber than a sack full on anvils, but I fail to see why a General Partner that receives 45% of DCF would lack incentive to increase/maintain it, especially when it is their principal source of income? Yes I am also long KMP and not worried but annoyed by the snipers.
    17 Apr, 01:50 PM Reply Like
  • Zee4Money
    , contributor
    Comments (45) | Send Message
     
    How to you get an underweight rating when the stock is almost $5 below the price you think it is worth? That sounds more like a buy or at worst a hold.
    17 Apr, 02:01 PM Reply Like
  • bigbenorr
    , contributor
    Comments (775) | Send Message
     
    Yeah that's quite a headscratcher. Kind of makes you wonder about their mathematical prowess....
    17 Apr, 03:50 PM Reply Like
  • 12439721
    , contributor
    Comments (10) | Send Message
     
    Right on! Plus if anyone thinks the incentive is unfair, then buy KMI...
    17 Apr, 02:02 PM Reply Like
  • Fatherbear
    , contributor
    Comments (29) | Send Message
     
    Yeah, MS still has a price target on LO at 45. Do your own research. Even if KMP reaches the MS target of 82, there's 6% upside plus quarterly payout.
    17 Apr, 04:24 PM Reply Like
  • Ruffdog
    , contributor
    Comments (1630) | Send Message
     
    I would put Rich Kinder up against anyone at Morgan Stanley and this call proves it.

     

    Thanks MS.
    Long KMP
    17 Apr, 04:26 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5778) | Send Message
     
    Moves like this remind me of Goldman Sachs when they downgraded (NOK) to a Don't Buy.

     

    While the downgrade was in place, Goldman Sachs bought over 60 million shares of (http://bit.ly/9V8R2A).

     

    Call me jaded, but I just don't trust rating agencies that hold millions of shares of the stocks they are rating. Too easy to move the needle in any direction they see fit.

     

    The system is broken. Beware. Be aware.
    17 Apr, 04:31 PM Reply Like
  • glf4mny
    , contributor
    Comments (312) | Send Message
     
    WTF does Morgan Stanley know about the pipeline transportation business. Kinder gets paid per barrel for anything shipped through their pipes. Maybe Kinder should evaluate Morgan Stanley's ability to not hire idiots.
    17 Apr, 08:41 PM Reply Like
  • david s armour77
    , contributor
    Comments (33) | Send Message
     
    This ratings are a joke! Who doesn't like a 7% plus dividend with 5% growth in the dividend each year? I ran a program on projected dividend increases of 5% over the next 7 years. With the beauty of compounding interest I get a nice return of 90 to 100% return over the seven years by reinvesting the dividend! Go back and look at the dividend over the last 15 years. Who else ups their dividend every quarter like clock work?
    18 Apr, 12:45 AM Reply Like
  • Sumflow
    , contributor
    Comments (3641) | Send Message
     
    avid s armour77 :>Go back and look at the dividend over the last 15 years.<
    `
    15 years distributions Kmp: http://bit.ly/1qSpUCa
    18 Apr, 02:00 AM Reply Like
  • bigbenorr
    , contributor
    Comments (775) | Send Message
     
    "he firm says KMP's oil production business (15%-20% of cash flow) creates material future asset/reserve replacement risk"

     

    What the hell are they smoking?? Permian production is going UP not down!! When KMP gets into these new plays with horizontal drilling and their EOR techniques, their assets will appreciate in value, couple that with ever increasing pipeline volumes and you have a clear winner. These yankees are probably surrounded by a stagnant economy where they live, so they can't understand the massive growth that is coming in the rest of the country and especially in Texas.

     

    The only risk I can see is poor WTI pricing, but KMP is pretty well hedged on that (to the point they have been selling product at a discount for a while now). Also I believe the perception of global excess oil supply might be somewhat exaggerated, there are some countries increasing production, but the untold story is declines in all the others.
    25 Apr, 08:02 AM Reply Like
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