3 Oct

Reading Hi-Crush Partners’ Upside Potential

WRITTEN BY Kurt Gallon

HCLP’s analyst recommendations

Hi-Crush Partners (HCLP), the fractionation sand producer, has a 58% upside potential from current levels—the highest among the top seven MLPs (master limited partnerships) by analyst rating. It’s in sixth place among MLPs in terms of percentage of “buy” ratings. The partnership now had 100% “buy” ratings for the five-month period up to August 2017. Now, it has a “buy” rating from 91% of its analysts.

Reading Hi-Crush Partners’ Upside Potential

Credit Suisse recently raised HCLP’s target price to $15 from $12, while Raymond James cut its target price to $17 from $18. HCLP is now trading below the low range ($10) of the analysts’ target price. HCLP’s average target price of $14.9 implies a 58% upside potential from its current price levels.

Valuation analysis

HCLP was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 4.6x—significantly below its historical five-year average of 16.2x and below the peer median multiple of 6.8x.

HCLP has strong US drilling activity, and higher drilling activity could drive HCLP’s fractionation sand volumes and earnings. For a recent analysis of frac sand producers, read Market Realist’s series HCLP, EMES: Are Frac Sand MLPs Currently Attractive?

Continue to the next part of this series for a look at the analysts’ ratings for Noble Midstream Partners (NBLX).

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