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MMLP Reports Q1 Numbers That Are Not Good Enough

|Includes: Martin Midstream Partners L.P. (MMLP)

In 2016 Martin Midstream Partners cut its quarterly distribution from $0.8125 to $0.5000. The price fell in the mid teens in terms of percent for the year - in a year when the sector average was up in the mid teens. MMLP ended 2016 with a yield of 10.90% and what then looked like very good current distribution (or after the cut) coverage. And that caused what I label "supporters of the justifiably down trodden stocks" like Double Dividend Stocks and Rida Morwa to produce pro-MMLP articles.

I would call the Q1-17 numbers "not good enough". For example, the cut in the distribution significantly cut earnings going to the general partner. In Q1-16, $4.547 million of gross DCF went to the general partner. In Q1-2017, $0.272 million of gross DCF went to the general partner. If gross DCF had staid roughly the same, DCF going to the holders of the MMLP partnership would have been up (4275 / 35372) twelve cents per share. But new units were added (to address credit metric issues) and gross DCF fell. Q1-17 DCF was $0.80 compared to Q1-2016's $0.79. It is an improvement, but given the conditions, the improvement is "not good enough".

New units were sold to reduce debt and improve the credit metrics. And the current Debt/EBITDA number of 4.22x is a good enough numbers. Less debt resulted in a falling quarterly cost of interest compared to Q4-16 - but not compared to Q1-17. Add to that problem, EBITDA is falling. The interest coverage ratio has improved from Q3-16's really ugly 2.83x. But the Q1-17 coverage is less than the Q1-16 coverage. There is improvement - but not year over year improvement. There is improvement, but it is not good enough.

As of 4/21/2017 MMLP sold at a yield of 10.18%. There is probably more risk priced into MMLP than it merits . . but not a lot. Even if it is under valued, it has commodity sensitive earnings that should scare away most - if not all - conservative investors.

My spreadsheet on the Q1-17 and historical numbers:

Martin Midstream Partners metrics

  Q1-2017 Q4-2016 Q3-2016 Q2-2016 Q1-2016 Q4-2015 Q3-2015 Q2-2015 Q1-2015 Q4-2014 Q3-2014 Q2-2014 Q1-2014
Revenues 253,325 236,901 174,537 190,348 225,605 254,371 226,021 251,099 305,353 376,983 377,088 403,261 484,809
Costs 229,422 242,995 165,374 178,413 201,351 240,186 212,401 231,302 280,641 366,818 360,809 385,363 460,266
EBITDA 46,818 56,106 33,306 41,634 49,296 41,415 38,859 45,040 50.367 39.253 2,478 26,331 37,744
DCF dollars 30,300 35,834 19,949 25,386 32,530 35,759 29,128 31,883 37,081 33.510 19,064 20,144 21,678
DCF to GP 272 361 361 4,546 4,547 4,041 3,975 4,157 4,305 x (539) (19) x
Net DCF 30,028 35,473 19,588 20.840 27,983 31,718 25,153 27,726 32,776 x x x x
Units 37,367 35,375 35,346 35,375 35,372 35,372 35,308 35,376 35,360 x 32,243 28,958 26,605
DCF/unit $0.8036 $1.0028 $0.5537 $0.5891 $0.7912 $0.8967 $0.7124 $0.7837 $0.9269        
Upcoming Distrib. $0.5000 $0.5000 $0.5000 $0.8125 $0.8125 $0.8125 $0.8125 $0.8125 $0.8125 $0.8125 $0.8125 $0.7925 $0.7875
Coverage 1.61x 1.98x 1.11x 0.72x 0.97x 1.10x 0.88x 0.96x 1.14x        
I could not find DCF going to the GP in 2014. There were 'after the reporting date' changes to quarterly EBITDA numbers in '16. Reported in Q4-16 2016 - EBITDA of 176,577 but the quarter's sum to 180,342
Broker1_DCF   $1.00 $0.55 $0.59 $0.79                
Broker2_DCF   $1.00 $0.55 $0.59 $0.79                
LTM EBITDA 177,864 176,577 165,651 171,204 174,610 173,755 173,519 x x x      
Long Tern Debt 750,735 808,107 913,504 878,891 873,611 865,103 876,405 840,159 849,369 888,887      
Long Term Debt/EBITDA 4.22x 4.58x 5.51x 5.13x 5.00x 4.98x 5.05x            
Interest Expense 10,920 12,054 11,779 12,155 10,112 10,827 11,994 9,925 10,546 7,852 11,459 11,441 11,451
Interest Coverage 4.29x 4.65x 2.83x 3.43x 4.88x 3.83x 3.24x 3.21x 4.77x      

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.