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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Sergio H who wrote (45302)	11/5/2011 3:04:39 PM
From: Spekulatius	Respond to of 78628

>>Expenses for the growth, $300m annually to expand its crude storage and transportation operations will continue to lower distributable cash flow, although NS forecasts a modest increase for 2012.<< Huuh? if they build new storage facilties and pipelines, they will generate more cash flow. Granted they need to make sure that the new Capex earns enough cash flow to cover the distributions for the new NS units that are issued to finance them but at 4-6x EBITDA multiples that should not be a problem for organic growth projects. For outright buy of new facilities that may be different because most fee based pipelines can fetch EBITDA multiples far above 10x, which makes it tough to be accreditive, given NS high cost of capital (due to low valuation). However that is more of a concern for NS than it is for NSH. Growth is almost always good for the GP, even though it may not be for the limited partner. The GP get's a free ride on the cash flow from expansion (as long as the wheel come off and distributions get cut due to credit downgrades etc.), while the limited partner has to pay for it in new units. FWIW Seekingalpha has a good CC transcript from a recent analyst meeting.