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What Does Buckeye Partners Valuation Indicate?

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Buckeye Partners’ price-to-distributable cash

So far in this series, we’ve discussed Buckeye Partners’ (BPL) 4Q17 EBITDA estimates, 2017 segment diversification, and distribution forecast. We also discussed the partnership’s market performance. In this part, we’ll analyze Buckeye Partners’ current valuation based on its historical and forward multiples.

Buckeye Partners was trading at a price-to-distributable cash flow of 11.1x as of January 31, 2018, which is below the average of 13.8x in the last ten quarters. Buckeye Partners’ forward EV-to-EBITDA multiple was 11.1x as of January 31—below the last five-year average of 13.6x. Buckeye Partners is trading below the peer median multiple of 11.8x.

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Buckeye Partners was trading at a distribution yield of 9.4% as of January 31. The ratio is above the historical five-year average of 6.9%. Buckeye Partners’ peers, Magellan Midstream Partners (MMP), NuStar Energy (NS), and Enbridge Energy Partners (EEP) are trading at a yield of 5.2%, 13.1%, and 9.7%, respectively. Notably, Buckeye Partners’ distribution yield is higher than the Alerian MLP ETF (AMLP) (7.5%) and the SPDR S&P 500 ETF’s (SPY) (1.8%) yields.

Buckeye Partners’ current valuation

All three metrics indicate that Buckeye Partners is trading a discount to its historical valuation and its peers. Buckeye Partners’ low valuation might reflect its high commodity price exposure segment, declining throughput volumes along a few pipeline and terminaling systems, and low distribution coverage. However, Buckeye Partners’ current valuation might also indicate a buying opportunity considering its strong expansion plans and low leverage. Recently, the partnership announced the open season for two new pipeline projects including the Line 602 Expansion and South Texas Gateway Pipeline system.

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