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Strategies & Market Trends : Value Investing

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To: Spekulatius who wrote (30310)	3/15/2008 4:20:50 PM
From: Spekulatius	Read Replies (1) of 78673

MLP's Started some MGG and MWE What both have in common is that they are General Partner (MGG) or GP and LP combined (MWE) MGG - General Partner for MPP 5% yield, distributions should grow at 2x of MPP's rate. This should result in 15-20% distribution growth for MGG. MWP - gas midstream MLP. They also own the General Partner (they merged GP into the LP shares in return for an ownership stake) Trades at 12x EV/EBITDA (Y2007). looks like 10%+ growth for a couple of years. markwest.com For whose who don't own General Partner / limited partener shares, the general partner only get's paid once the distributions for the limited Partner reaches a certain thresholds. In the case of MGG/MMP duo, MGG reached the 50% threshold and now get's paid 50% of the incremental cash flow of the entity (IDR rights). This results in MGG have approx. 2x MMP's the distribution growth. of course MGG's downside is that it's yield is currently lower, but if things continue the way they have in the past that should change in 2-3 years. Most GP units have not done well. Obviously a deceleration in growth hurts the GP much more so than the LP. So for there has not been a growth deceleration in cash flow growth although the current credit crunch could impact the ability to obtain financing. The above mentioned MLP's however have below average debt loads,a good interest coverage (3x+) and a stable cash flow, which should work to their advantage. I like the pipelines (especially the gassy ones) as recession & inflation plays. Pipelines have a large moat (mostly), stable and inflation adjusted income and profit from higher energy pricing, since they are the cheapest mode of transport. Also inflation makes the pipelines that are already build more valuable. Of course right now the market has a different opinion.

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