Cheniere Energy Partners Holdings (CQH +0.4%) is upgraded to Outperform from Neutral at Credit Suisse based on valuation while the firm lowers it stock price target for Cheniere Energy (LNG) after the proposed merger between the MLP and its parent is called off.
Credit Suisse says its prior valuation for LNG assumed closure of the CQH merger, implying direct receipt of CQP LP distributions; it also cites higher interest expenses tied to the recent issuance of $1.5B in Corpus Christi notes which were issued at 5.875%.
The firm thinks the merger will take place eventually but for the next 12-18 months, it considers CQP and now also CQH as the preferred ways to invest in the Cheniere family.
Credit Suisse raises its CQH price target to $28 from $24, while lowering its target for LNG to $52 from $54, and maintains its Outperform rating on LNG as well as Cheniere Energy Partners (CQP -0.3%); CQH essentially is a non-MLP holding company for shares of CQP.
Citigroup analysts Faisel Khan and George Wang rebut the bear argument against Cheniere Energy (NYSEMKT:LNG) proffered by critics such as Jim Chanos, suggesting two potential catalysts that could drive shares higher.
First, Citi believes new LNG CEO Jack Fusco will provide visibility to the market on the timing of when the company will be profitable and when it will start returning capital to shareholders.
Second, the firm notes that LNG’s marketing entity has contracts to sell 84 liquefied natural gas cargoes through 2018 that could be valued at $1B in gross revenue, and visibility on the margin for the cargoes could provide clarity on the potential cash flows from marketing.
Citi maintains its Buy ratings for LNG, Cheniere Energy Partners (NYSEMKT:CQP) and Cheniere Energy Partners LP (NYSEMKT:CQH) with respective $47, $36 and $23 price targets.
NGL Energy Partners (NYSE:NGL) fell more than 10% in today's trade after Goldman Sachs downgraded units to Sell from Neutral with a $6 price target, slashed from $12, but three other energy MLPs downgraded by the firm fared better.
Goldman sees material risk to NGL’s distributions given weak historical and projected cash flow conversion, high GAAP leverage of 7.2x vs. a peer average of 4.4x, and poor current coverage of ~0.6x.
The firm expects volume pressure and limited organic growth opportunities to adversely impact NGL’s ability to conserve liquidity and maintain distributions.
Cheniere Energy Partners (NYSEMKT:CQP), Summit Midstream Partners (NYSE:SMLP) and Western Gas Equity Partners (NYSE:WGP) posted gains or finished flat despite being downgraded to Neutral from Buy.
Goldman notes that while CQP offers a total return opportunity of 18%, it is less attractive than that offered by Cheniere Energy (NYSEMKT:LNG) and Cheniere Energy Partners Holdings (NYSEMKT:CQH), which offer respective total return opportunities of 30% and 28%.
Cheniere Energy (LNG +3%) is initiated with an Overweight rating and $54 price target at J.P. Morgan, which cites cash flows stemming from blue-chip customer contracts and visible project catalysts.
JPM credits LNG as the first North American mover, beginning its services two years before the next U.S. peer, which allows the company to have the scale and diversification in the Americas to potentially drive increasing market share, revenue growth and profit margins.
The firm also highlights LNG’s value driven contracts, which remain favorable as there are no opportunities to change the fixed fees or re-sell contracts for customers, allowing the company to remain a market leader and drive value for shareholders in 2016.
Cheniere Energy Partners (CQP -3%) and Cheniere Energy Partners (CQH +0.9%) also are initiated at Overweight.