Current Undervaluation Provides An Ideal Entry Point In Energy Transfer Partners

Online, November 16, 2012 (Newswire.com) - Although Energy Transfer Partners (ETP) posted weak third-quarter results chiefly because of the dismal natural gas market, we believe the partnership has made sound strategic moves in the energy sphere and seems well-poised to increase its distributions in the near future. The merger with Sunoco Inc will prove to be the right catalyst for the partnership's success and we hold that the current undervaluation in the market provides the right time to make an entry.

ETP has a debt/equity ratio of 125%, interest coverage of 2.5x and cash from operations (TTM) of $1.25 billion. Currently, ETP trades at an EV/EBITDA multiple of 12x and given the fact that the SUN deal provides ETP with the much-needed diversification and potential higher distributable cash flows in the future, we believe the units are undervalued in the market. As seen from the table above, ETP is trading at a 25% discount to its competitors EV/EBITDA multiple.

Distributions of 89.375 cents per unit were announced last month to unit-holders as of November 6, 2012 and were paid on November 14.

Apart from the diversification into the crude-oil transportation business, the recent merger also widens ETP's geographical reach into northeast America where ETP previously did not have any presence. 33% is the expected contribution from the Sunoco merger to the cash flows in the future. This is a very good entry point for long term investors as the units are trading near their 52-week lows of $40 and we believe that ETP has made all the right moves in executing its long-term strategy to bring more predictability and improvement in its business plan.

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