SXL’s enterprise value
Sunoco Logistics Partners (SXL) has an enterprise value of ~$10.9 billion. Buckeye Partners (BPL) and Plains All American Pipeline (PAA) precedes SXL in terms of enterprise value among the selected peer group.
Enterprise value—approximately equal to market equity value plus the net debt (debt less cash)—is an important metric for the valuation of the entire business. Equity value alone just gives the value to equity holders.
SXL’s forward EV-to-EBITDA multiple
Of the selected companies, Sunoco Logistics’ forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 8.6x is below the group average of 11.4x. At the same time, Shell Midstream Partners (SHLX) has the highest forward EV-to-EBITDA of 17.9x.
SXL’s operating margin
Sunoco Logistics (SXL) has the lowest operating margin of 5.4% among the selected peer group. This is because SXL’s crude oil acquisition and marketing business has very thin operating margins, which brings the overall margins down.
For 3Q15, Sunoco Logistics’ total operating income was $94 million, while operating revenues stood at $2.4 billion. SXL forms ~4.8% of Global X MLP ETF (MLPA).
SXL’s distribution yield
Sunoco Logistics’ distribution yield is on par with the group average of 8.8%. However, SXL’s current distribution is quite high compared to its historical levels. High distribution yield indicates a high level of risk and a high cost of equity capital.
Plains All American Pipeline (PAA) has the highest distribution yield of 14.7% while Shell Midstream Partners (SHLX) has the lowest distribution yield of 2.9%. SHLX’s low distribution yield could be attributed to its lower debt leverage and strong profitability.