Enable Midstream’s market performance
Enable Midstream Partners (ENBL), which rose 71.0% in 2016, had a good start in 2017 as well. It has risen 9.3% since the beginning of 2017. Enable Midstream’s peers EnLink Midstream Partners (ENLK) and Western Gas Partners (WES) have gained 3.5% and 11.6%, respectively, in 2017. At the same time, the Alerian MLP ETF (AMLP), which is comprised of 25 midstream energy MLPs, has gained 3.4% in 2017. However, Enable Midstream and most of its peers are still trading below the levels before the rout in energy prices.
Enable Midstream’s valuation
Currently, Enable Midstream Partners trades at a price-to-distributable cash flow of 12.3x. The partnership is trading above its last ten-quarter historical average of 11.6x due to the recent rally. Enable Midstream’s enterprise value-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) ratio using a trailing 12-month adjusted EBITDA is 14.0x. Similar to the price-to-distributable cash flow, the current EV-to-EBITDA ratio is above the ten-quarter average.
Enable Midstream Partners’ forward EV-to-EBITDA multiple, which is based on the EBITDA estimate for the next 12 months, is 12.5x. The company’s forward EV-to-EBITDA multiple is below the peer median multiple of 12.8x.
However, the EV-to-EBITDA ratio can be misleading in understanding the unit valuation of limited partner units. The entire EBITDA in the EV-to-EBITDA ratio calculation may not be available to limited partners. Enable Midstream Partners has IDRs (incentive distribution rights) in its structure. IDRs mean that its sponsors, CenterPoint Energy (CNP) and OGE Energy (OGE), get a higher share of incremental cash flows.
Enable Midstream Partners’ slight undervaluation relative to its peers might indicate a buying opportunity. At the same time, its low valuation might reflect its flat distribution and relatively higher commodity price and volume exposure.