Capital Product Partners (CPLP +2.1%) is initiated with a Buy rating and $2.75 price target at B. Riley FBR, which says the MLP offers the potential for higher distributable cash generation with a strong base of low-risk cash flows.
CPLP operates a diverse fleet of container, tanker and dry bulk vessels under a combination of spot and long- and medium-term charter rates, and has a supportive sponsor that provides a steady source of high-return drop-down assets, B. Riley says.
Based on the current 78% charter coverage for 2018 and 63% charter coverage for 2019, as well as an average charter duration of 4.7 years, B. Riley believes CPLP's current agreement should keep EBITDA stable.
The firm also thinks CLPL's plan to spin off its tanker fleet into a separate public entity increases the overall risk profile but will continue to offer a predictable revenue stream from its medium- and long-term contracts while participating in the upside of an improving supply/demand dynamic in the crude tanker and product/chemical market.
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