Tag Archives: Soon

Toshiba Memory to go public as soon as next autumn: Kyodo
October 24, 2018 12:00 pm|Comments (0)

TOKYO (Reuters) – Toshiba Memory Corp, the world’s No. 2 producer of NAND flash memory chips, will go public as soon as the autumn of next year, Kyodo News reported on Wednesday.

Toshiba Corp sold Toshiba Memory in June to a consortium led by Bain Capital LP, which also included Apple Inc, South Korean chipmaker SK Hynix, Dell Technologies and Seagate Technology.

When asked about the Kyodo News report, a spokesman from Toshiba Memory said there is no change to its plans to go public in the next two to three years and that it has not made a decision on when specifically it will launch its initial public offering.

The sale of the chip unit helped save Toshiba Corp from years of financial crisis brought about by accounting scandals and billions of dollars in cost-overruns at its U.S. nuclear unit Westinghouse.

Reporting by Yoshiyasu Shida, writing by Stanley White; Editing by Vyas Mohan

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A Discounted Backdoor Into An 18% Yield – Buyout Should Close Very Soon
June 23, 2018 6:13 pm|Comments (0)

Due to a generous 8.7% discount to its post-buyout price/unit, we just increased our holdings of Southcross Energy Partners (SXE), a smaller midstream LP, which is being bought by American Midstream Partners LP (AMID).

The deal is supposed to close by the end of Q2 2018, and it has already been approved by SXE and AMID unitholders, and has received final state approval.

Deal highlights – Among many other positive attributes, AMID’s mgt. sees this deal as being immediately accretive to its Distributable Cash Flow. This makes sense – SXE used to pay $ .40/unit quarterly, but eliminated its payout in February 2016. However, SXE generated $ 25.36M, and AMID generated $ 89.88M in DCF over the past four quarters.

(Source: AMID site)

The new entity will also have a simpler structure, with four segments: Gas G&P, Natgas Transportation, Liquid Pipelines, and Offshore Pipelines, with the offshore segment being its largest, contributing 57% of gross margins:

(Source: AMID site)

AMID Assets

AMID has significant offshore assets in the eastern Gulf of Mexico, an area which is projected to see 32% production growth over the next 3 years. Technological advances should also reduce production costs for Gulf oil.

AMID’s CEO detailed this growth on the Q1 ’18 earnings call:

“In February of this year, the Gulf of Mexico produced 1.7 million barrels per day of crude oil and 2.6 Bcf a day of natural gas. To put this in perspective, the Gulf of Mexico is the second largest crude oil producing base in The United States behind only the Permian Basin. It is producing roughly 30% more oil than either the Bakken or the Eagle Ford basins and 3 times more than the Anadarko basin, home of the SCOOP.”

“In Q1 ’18, AMID’s Okeanos pipeline had volume increases of over 10% vs. Q1 ’17, and were up 6% vs. Q4 ’18, due to additional volumes from dedicated wells tied into the system.”

AMID’s Delta House asset has been under maintenance, which has reduced its output. On the Q1 call, management pointed out that “current production is just under half of pre-maintained levels or about 55,000 to 60,000 barrels a day equivalent. However, by July, we anticipate the crude oil and natural gas volume should increase from current levels by 64% and 155%, respectively”.

In addition, AMID is receiving support from ArcLight Partners’ affiliate, Magnolia Infrastructure Holdings, LLC, “to provide additional capital and corporate overhead support to us during the first three quarters of 2018 in connection with temporary curtailment of production flows at Delta House. Pursuant to the agreement, Magnolia has agreed to provide support to us in an amount to be agreed, up to the difference between the actual cash distribution received by us on account of our interest in Delta House and the quarterly cash distribution expected to be received had the production flows to Delta House not been curtailed. Subsequent to the balance sheet date of March 31, 2018, we have received $ 9.4 million for such support”. (Source: AMID Q1 ’18 10-Q)

(Source: AMID site)

AMID has over 1,565 miles of natural gas and crude oil gathering systems, 8 processing plants with ~325 MMcf/d of capacity, 4 fractionation facilities, a fleet of 75 crude oil transportation trucks and 95 trailers, and ~20 NGL transportation trucks. Its onshore assets are located in some of the most prolific production areas, including the Permian and Eagle Ford basins:

(Source: AMID site)

(Source: AMID site)

AMID’s natural gas transmission segment has significant firm, take or pay contracted volumes in Arkansas, Alabama, Mississippi, and Louisiana, with a balanced customer mix.

Management commented upon the uptick in volume on the Q1 ’18 earnings call:

“AMID’s Southeast Natural Gas Transportation assets performed very well, establishing a new throughput record of over 835 million cubic feet a day. This segment experienced 75% growth in gross margin over 2017, as a result of the acquisition of the Trans-Union pipeline in the fourth quarter of 2017 and strong demand as a result of exceptionally cold weather across the Southeast US.”

A Backdoor Discount

SXE continues to sell at a discount to its post-buyout price, which is equivalent to .16 units per AMID unit. With AMID at $ 10.00 on 6/21/18, SXE should have been trading at $ 1.60, but it closed at $ 1.46.

Distributions

SXE doesn’t currently pay a distribution, but after the buyout, the converted SXE units will receive the same $ .4125 quarterly payout as current AMID unitholders.

At $ 1.46, SXE is trading at a post-buyout equivalent of $ 9.13, which translates into an 18.08% yield. AMID’s next ex-dividend date should be ~8/3/18, with a pay date of ~ 8/14/18:

Deal Terms

“AMID has agreed to acquire equity interests in certain Southcross Holdings’ subsidiaries that directly or indirectly own 100% of the limited liability company interests of the general partner of SXE and approximately 55% of the SXE common units by issuing 3.4 million AMID common units, 4.5 million new Series E convertible preferred units (the ‘Preferred Units’), options to acquire 4.5 million AMID common units (the ‘Options’) and the repayment of $ 139 million of estimated net debt. The Preferred Units will be issued at a price of $ 15.00 per unit and may be paid-in-kind at the AMID common unit distribution rate at AMID’s option for two years. AMID will have the right to convert the Preferred Units to AMID common units if the AMID 20-day volume weighted average price exceeds $ 22.50. The Options are American-style call options with an $ 18.50 strike price that expire in 2022.” (Source: AMID site)

There shouldn’t be any immediate threat of the Series E convertible preferreds converting into more AMID common units since they can’t convert unless AMID’s common price goes higher than $ 22.50, which is over twice its current price level.

Here’s the breakdown of pre- and post-buyout units, which will total ~63.22M after the deal goes through:

We calculated what the post-buyout distribution coverage should look like, using the combined trailing Distributable Cash Flow/Unit of both companies as of 3/31/18 vs. AMID’s current $ 1.65/year payout.

The initial post-deal coverage should work out to about 1.10X, which is what AMID’s press release listed:

“AMID expects the transaction to be single-digit accretive to DCF/unit in 2018 and 2019, approaching double-digit accretion in 2020. AMID expects to maintain a pro forma distribution coverage of 1.1 to 1.3 times”. (Source: AMID site)

Trailing Earnings

Judging by AMID’s and SXE’s trailing figures, this deal should be just what the Dr. ordered – both companies should emerge stronger as one entity.

Due to non-core divestitures, AMID has had declining DCF and distribution coverage, with coverage falling to 1.04X. EBITDA has been down slightly over the past four quarters as of 3/31/18.

SXE’s EBITDA has been just about flat, but its DCF fell -17.82% over the past four quarters.

In addition to its divestitures, AMID’s management has made a series of acquisitions in order to transform the company into a more stable cash flow model. AMID hasn’t gone to the equity markets to fund these acquisitions.

(Source: AMID site)

Valuations

The market has pressured SXE’s price/unit to an extreme point – it’s currently selling for just 15% of Book Value and .11X Price/Sales. SXE’s Price/DCF of just 2.81X is also the lowest valuation we’ve seen in many moons.

Debt

Another part of the rationale for this buyout is for the combined company to emerge with lower debt leverage. Since AMID hasn’t funded its growth via issuing more units, its debt leverage has increased:

“In conjunction with the transaction, AMID will continue executing against its stated capital optimization strategy to deliver a strong pro forma balance sheet with substantial liquidity. AMID is targeting an additional $ 400 to $ 500 million of non-core asset sales primarily related to its terminaling services segment.”

“These proceeds, incremental debt financing and modest equity will allow the combined entity to target closing pro forma trailing debt to EBITDA of near 4.5 times with a 12- to 18-month goal of near 3.5 times and target pro forma liquidity of $ 300 to $ 400 million.” (Source: AMID site)

In February, AMID announced a definitive agreement for the sale of its refined products terminaling business to DKGP Energy Terminals LLC, a joint venture between Delek Logistics Partners LP (DKL) and Green Plains Partners LP (GPP), for approximately $ 138.5 million in cash, subject to working capital adjustments. The transaction is expected to close in the first half of 2018.

AMID’s management just announced on 6/18/18 that it has “entered into a definitive agreement for the sale of its marine products terminaling business to institutional investors advised by J.P. Morgan Asset Management, for approximately $ 210 million in cash, subject to working capital adjustments. The transaction is expected to close in the third quarter of 2018.” (Source: AMID site)

We assembled this table to get an idea of how the proposed debt leverage is working out. As of 3/31/18, AMID had Net Debt/EBITDA leverage of 6.63X, its leverage was 8.03X, and the combined leverage was 7X.

In this table, we used AMID management’s Net Debt/EBITDA targets in tandem with its asset sales to see if the targets are realistic. Management is targeting annual post-deal EBITDA of $ 300M and a 12-month goal of ~4.5X leverage.

With the sale to DKL of $ 138.5M, and the $ 139M paydown of SXE’s debt, the initial Net Debt/EBITDA may be ~5.88X, which is much better than the Q1 ’18 figure of 7X.

Moving forward to Q3 ’18, with the JPMorgan $ 210M sale, the debt could reach $ 1,250.99M, with a Net Debt/EBITDA ratio of 5.04X. This is assuming a devil’s advocate scenario in which trailing EBITDA merely stays flat, at $ 248.52M, which may be too conservative seeing that mgt. is targeting $ 300M annually.

Management addressed post-deal debt and DCF on the Q1 ’18 call, asserting that it should generate $ 300M in EBITDA and hit $ 140M in DCF, which is much higher than the combined $ 115M AMID and SXE generated in the most recent four quarters:

“Following the closing of the Southcross acquisition and combined with a positive impact of recent growth initiatives, we remain on track to generate pro forma annualized EBITDA in excess of $ 300 million and approximately $ 140 million in distributable cash flow.”

It looks like the combined companies could hit that 12-month leverage target of 4.5X if they’re able to increase their EBITDA:

Risks

Debt Leverage: AMID’s 2018 Q1 10-Q states that, as of 3/31/17, its total leverage ratio was 5.23X. However, we came up with a higher figure of 6.6X. One of the distinctions that management makes is not counting non-recourse debt in its presentations – it refers to “compliance leverage”:

(Source: AMID 2018 Q1 10-Q)

Moody’s downgraded AMID on May 4, 2018, but note the reference to the financial support from ArcLight Partners:

“Speculative Grade Liquidity (SGL) Rating to SGL-4 from SGL-3. Other ratings remain on review for downgrade. The downgrade of the liquidity rating to SGL-4 reflects deterioration in liquidity and Moody’s expectation that AMID will have weak liquidity over the next 12 months as the partnership continues to rely heavily on its revolver while executing on aggressive growth strategies and repositioning of its asset base”.

“The SGL-4 liquidity rating reflects Moody’s expectation that AMID will have weak liquidity over the next 12 months. At year-end 2017, the partnership had $ 9 million of cash and only $ 48 million available under its $ 900 million revolver. Financial covenants limit access to less than the full revolver which expires in September 2019. ArcLight intends to support the partnership through April 2019 to comply with its financial covenants, if necessary. Also supporting the partnership’s liquidity is its ability to monetize assets. Moody’s notes that the partnership anticipates it will close on the sale of its refined products terminals during the second quarter of 2018 for $ 138.5 million (subject to working capital adjustments).” (Source: Moody’s)

Deal Execution – There’s always a chance that the buyout won’t go through. However, it has been approved by both boards, by the unitholders of both AMID and SXE, and 4/10/18 they received the final state-level regulatory approval for the merger. On the Q1 ’18 call, management said that “at this time, we expect to close this transaction during the second quarter.”

Summary

We increased our holdings of SXE, based upon the current post-buyout price discount, and the very attractive 18% post-buyout yield. Another plus is that a very supportive, veteran energy investing firm, ArcLight Capital Partners, owns ~27% of AMID’s units.

(Source: AMID site)

All tables furnished by DoubleDividendStocks, unless otherwise noted.

Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

Disclosure: I am/we are long SXE, DKL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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A 10% Yield, 11 Straight Hikes, No K-1, IDR Swap Deal Coming In Q2, Goes Ex-Dividend Soon
April 14, 2018 6:07 pm|Comments (0)

Looking for a new deal? In MLP land, there have been a few GP/Yieldco consolidations over the past few months, and we just came across another one, which looks rather interesting for income investors.

Tallgrass Energy GP LP (TEGP) is the parent/GP of Tallgrass Energy Partners LP (TEP) and has interests in a group of energy-related entities. On 3/26/18, TEGP announced a merger with TEP, in which TEP unitholders will receive two TEGP units for each TEGP unit they own.

TEGP’s earnings are virtually synonymous with TEP’s, which stem from midstream operations in the western U.S.

(Source: TEGP site)

Tallgrass Energy GP LP, through its interests in Tallgrass Equity LLC, provides crude oil transportation services to customers in Wyoming, Colorado, and the surrounding regions of the United States. The company operates through three segments: Natural Gas Transportation; Crude Oil Transportation; and Gathering, Processing & Terminalling.

Tallgrass owns and operates more than 6,700 miles of natural gas pipeline and about 760 miles of crude pipeline across a broad portion of the U.S. It also has one of the industry’s leading water reclamation programs situated in close proximity to producers. (Source: TEGP site)

To say that the Tallgrass corporate setup was complex would be an understatement – trying to decipher this setup reminded us of those Franz Kafka novels we read in English Lit. 101:

(Source: TEGP site)

This is one of the reasons that management is doing this merger deal – to simplify the group’s structure for investors, in addition to reducing its cost of capital:

(Source: TEGP site)

As mentioned above, TEP unitholders will receive two TEGP units for each unit that they own. In addition, management raised TEGP’s quarterly distribution to be exactly half of TEP’s, so there will be no distribution loss to TEP unitholders.

Tallgrass Energy Partners LP will be merged into a new entity, Tallgrass Energy LP, which will trade on the NYSE under the ticker “TGE.”

The new entity will be taxed as a C-Corp, which eliminates K-1 hassles for investors, and can give the combined companies broader market exposure.

The deal has already been approved by the boards of both TEGP and TEP, in addition to the TEP conflicts committee.

(Source: TEGP site)

On the Q4 ’17 earnings call, management referenced the fact that there’s a potentially valuable tax shelter available for the company.

“TEGP has a deferred tax asset of $ 313.0 million which is the expected tax benefit of available future deductions that offset future taxable income. It is currently expected that no cash taxes will be paid by TEGP for a period estimated to exceed 10 years”.

However, it’s uncertain if regulators will allow the new entity to use this asset or not.

Distributions

Here’s how the upcoming May distributions look for TEGP and TEP.

TEGP increased its quarterly payout by 37%, from $ .3675 to $ .4875, and was currently yielding 9.87%, at a price/unit of $ 19.75, as of 4/12/18 intraday. TEP’s distribution is $ .975, (2x TEGP’s). Both payouts go ex-dividend on 4/27/18.

Both companies have good quarterly distribution hike streaks going – TEP has raised their payouts for 19 straight quarters, while TEP has an 11-quarter streak.

We’ve added these two tickers to our High Dividend Stocks By Sectors Tables, in the Basic Materials section.

Arbitrage anyone? Unlike many mergers, in which the acquiring company pays a fixed price/share for the target company, this one is based upon a 2X multiple of the buying company’s price, TEGP, which arbitrage players may want to try to profit from. As of 4/12/18 intraday, there was a -$ .30/unit variance between the two unit prices, including the effect of the upcoming distributions:

Earnings

The yieldco, TEP, had huge growth in 2017, as new assets kicked into earnings. EBITDA rose 57%; DCF grew 50%; and revenue grew a more modest 7%. Management continued raising the quarterly distributions, which grew 20% in 2017, while TEP’s distribution coverage improved by 16%.

You can see part of the reasoning for the merger in the GP Interest & IDR payout figures below. These payouts grew by 43% in 2017 and were ~24% of TEP’s DCF. The total distributions payout was ~$ 563M, which should decrease after the elimination of the GP and IDR payouts post-merger.

Looking back further, it’s clear that TEP has produced some outstanding results, with EBITDA growing by over 6X from 2014 to 2017:

(Source: TEGP site)

This filtered into the Tallgrass group’s earnings:

(Source: TEGP site)

This is what supported all of these distribution hikes for TEP, which had a CAGR of 31% since 2013:

(Source: TEGP site)

Analyzing the Deal

Here’s how the merger shakes out, if management leaves the new entity payout at $ .4875/quarter, ($ 1.95/year). There will be 152.2M publicly held units and 126.7M LLC equity exchanged units, which would receive a total of ~$ 546M in annual distributions:

Can they afford to pay $ 1.95/year to all of those units? Management guided to a range of $ 755-835M in adjusted EBITDA for the new entity, with a coverage ratio of 1.20x or better:

(Source: TEGP site)

They had slightly different guidance figures on the S-4 document for this deal – $ 807M for adjusted EBITDA, and a DCF figure of $ 662.00 for 2018.

(Source: TEGP S-4 2018)

We looked at it three ways, using low, high, and S-4 guidance figures. Since there wasn’t a DCF figure given in the deal presentation, we used a 90% multiple of EBITDA guidance, (which is the same as 2017’s ratio), in the low-end and high end columns.

As the merger presentation stated, the new entity should have solid distribution coverage:

On the low end, using a $ 1.95/unit annual payout, the new entity would have coverage of ~1.24X. The high end coverage would be ~1.20X, if management raised the distribution to $ 2.24/year (which they haven’t stated as of yet).

If they hit the high end of their EBITDA target, and DCF is 90% of it, and they leave the payout at $ 1.95/year, their coverage would be a very robust 1.38X.

Using the S-4 doc’s guidance figures of $ 807M in EBITDA, and $ 662M in DCF, we inferred that coverage would be ~1.21X, if the distribution was $ 1.95/year for the new entity:

A good part of TEP’s EBITDA stems from unconsolidated investments. In 2017, TEP received $ 306.6M from these sources, which include the Rockies Express and the Pony Express Pipelines:

(Source: TEGP site)

Here’s a look at the 2015-2017 income statements for Rockies Express Pipeline LLC, often referred to as “REX” in the company docs. After a revenue and operating income dip in 2016, REX came roaring back in 2017, with revenues up 18.7% vs. 2016, and up 8.7% vs. 2015. Operating income also bounced back, rising 36% in 2017 vs. 2016, and 10.8% vs. 2015:

(Source: TEGP 2017 10K)

Risks

Deal Execution

TEP unitholders must approve the deal. However, Tallgrass Equity owns ~35% of the TEP units, so the deal should go through. The TEP and TEGP boards, and the conflict committee also already approved the deal. The other holdup might be regulators, but as of yet, we’ve heard no negative news about this.

New Entity Debt Load

The new entity would own 75% of Rockies/REX, so we took a look at how the combined debt loads of TEP, TEGP, and REX would affect the new entity’s debt leverage and interest coverage.

Both TEP and REX had good interest coverage in 2017, at 8.12X and 5.48X, respectively. The new entity would have ~3.6X interest coverage, based upon 2017 figures, which, of course, will change. It’ll be lower coverage, but still reasonable.

They also had reasonable debt leverage of 3.17X and 2.76X, respectively, which is roughly in line with other midstream companies we follow. (See Financials section for more on this.)

The new entity’s Net Debt/EBITDA leverage looks like it’ll range from ~5X to 5.6X. The company’s 10-K mentioned that there’s an upper end limit of 5.5X leverage. Timing is often tricky in these deals – the new entity may experience higher levels of leverage initially for 1-2 quarters, depending upon when the deal is finalized. However, it doesn’t appear that operations management will be changing, so that’s an advantage.

Management also mentioned on the earnings call that,

“REX’s board has agreed to repay the July 2018 maturity of $ 550 million. At TEP and Tallgrass equities current ownership that will amount to approximately $ 275 million and $ 137.5 million, respectively. This debt reduction will further strengthen REX’s balance sheet for the long-term and should be the next step towards returning REX to an investment grade pipeline. The less interest at REX is paid at the entity, the more cash there is to distribute.”

Other Developments

On the earnings call, management detailed several new growth projects:

On January 3, we announced an agreement to buy 51% interest in the Pawnee Terminal from Zenith Energy from $ 31 million and also announced the acquisition of a 38% interest in Deeprock North for $ 19.5 million. This past week TEP announced the acquisition of water infrastructure assets in the Bakken for $ 95 million, a prime customer there being XTO with an additional $ 45 million of capital expenditures expected.

We also announced the formation of a joint venture in the Powder River basin with Silver Creek midstream for the development of the Iron Horse crude oil pipeline. Iron Horse will transport crude oil from the PRB to Guernsey and then on into Pony Express. We expect to invest approximately $ 150 million into the joint venture and its associated Guernsey terminal.

Analysts’ Estimates And Price Targets

TEGP has received some upward earnings estimate revisions over the past month, as details of the deal were digested. 2018 estimates rose from $ 1.30 to $ 1.44, while 2019 estimates rose from $ 1.25 to $ 1.61.

(Source: Yahoo Finance)

At $ 19.75, TEGP is ~23% below analysts’ average price target, and ~42% below the $ 28.00 highest price target:
Performance

TEGP (candlesticks) and TEP (lavender line) are both down in 2018 but have moved higher since the March 26th merger announcement.

Options

Two other strategies to potentially profit from the merger deal, on a short-term basis, are selling covered calls and/or cash secured puts.

If you want to be aggressive but still get a lower breakeven, this in the money May put trade offers a $ 1.25 bid premium, roughly 2.5X TEGP’s $ .4875 quarterly payout, with a breakeven of $ 18.75.

Our Cash Secured Puts Table can give you more details for this put trade and over 25 other put-selling trades.

Conversely, you could hedge your bet by buying TEGP and selling covered calls against your units.

We’ve added this July trade to our Covered Calls Table, which tracks over 25 covered call trades on a daily basis. With the heightened volatility in 2018, we’re finding higher option premiums, which help to hedge vs. price declines.

The July at the money $ 20.00 call strike pays $ 1.20/unit, for an annualized yield of ~22%.

Here are the 3 main profitable scenarios for this trade:

  1. Static, in which TEGP doesn’t rise to or above $ 20.00 near the ex-dividend date or the expiration date, and you keep your TEGP units. In this instance, you’d collect $ 1.69/unit, the combination of the option $ and the distribution.
  2. Assigned pre- ex-dividend date. You’d collect the $ 1.20 option premium, and $ .25, the difference between TEGP’s $ 19.75 price/unit and the $ 20.00 strike, but no distribution.
  3. Assigned after the ex-dividend date. You’d collect all three profit streams, for a yield of 9.81% in this 100-day trade, or ~35% annualized.

You may be wondering why we didn’t detail selling options for TEP. The problem is that, since TEP’s eventual buyout price is tied to 2X TEGP’s price, you could end up with a downdraft once you buy TEGP. We’ve been down that road before, and it wasn’t pretty.

Since you’ll end up with TEP’s assets anyway, we prefer to own TEGP. Although the conventional wisdom is often to short the acquiring stock, and buy the target stock, we don’t feel that this will work in this case.

Valuations

Since it’s TEP’s earnings and operations that are mainly driving the Tallgrass group, we compared TEP’s valuations and yield to those of other midstream high-yield stocks we’ve covered in other articles. These include DKL Logistics Partners LP (DKL), Summit Midstream Partners (SMLP), Holly Energy Partners, L.P. (HEP), MPLX LP (MPLX), PBF Logistics LP (PBFX), Martin Midstream Partners L.P. (MMLP), and Green Plains Partners LP (GPP), Energy Transfer Partners LP (ETP), and Williams Partners LP (WPZ).

in 2017, TEP had far and away the best distribution coverage, at 1.47X. As detailed above, the new entity, TGE, will probably have coverage of ~1.20X, which is in line with this group’s average. TEP’s Price/DCF of 7.41X is lower than the group’s 8.82X average, as are its Price/Book of 1.97X, and its EV/EBITDA of 7.54X:

Financials

TEP’s Net Debt/EBITDA of 3.17X is the second lowest in this group, and its ROE and Operating Margin are above average. Its Debt/Equity leverage is also better than the group average.

Debt And Liquidity

On the Q4 earnings call in February (which was prior to the merger deal announcement), management detailed TEP’s liquidity status, as of 12/31/17:

At the end of the fourth quarter, TEP had nearly $ 1.1 billion of liquidity available on its revolver. TEP’s leverage as of quarter end was approximately 3x based on the trailing 12-month adjusted EBITDA as calculated according to our credit agreement provisions. As you know, this continues to be on the low end of our 3x to 4x long-term leverage target indicating ample leverage capacity at TEP to fund third-party acquisitions, organic growth projects, and TEP’s share of REX’s July 2018 debt maturity of $ 550 million.

Summary

We rate TEGP a buy, based upon its attractive, well-covered and improved yield, its sound management, and the oncoming merger deal, which will lower the cost of equity, and its ultimate overall organizational simplification – it’ll remain a C-Corp as the new combined entity, with no K-1 hassles for income investors.

All tables furnished by DoubleDividendStocks.com, unless otherwise noted.

Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

CLARIFICATION: We have two investing services. Our independent, legacy site, DoubleDividendStocks.com, has been specializing in increasing yields via selling options on quality high dividend stocks since 2009. Option yields have improved a great deal in 2018, due to higher market volatility.

Disclosure: I am/we are long DKL, TEGP, MMLP, PBFX, ETP.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Here’s Why You Will Soon Find Fewer Free Articles On Google
October 2, 2017 10:40 am|Comments (0)

Google does a lot to infuriate traditional media companies, but one of its most controversial policies has for years been “First Click Free,” in which it demanded that publishers have to give a certain number of articles to readers for free in order for those articles to appear high up in Google’s search results.

Publishers are increasingly moving their articles behind subscription paywalls, rather than relying on digital advertising for their revenue, so this policy has become increasingly troublesome. For example, when The Wall Street Journal stopped giving free tasters of its content earlier this year, its traffic from Google users plunged by 44%. As Google has a global search engine market share of over 90%, that level of control matters for any publisher.

Something had to give, and on Monday it did. In a blog post, Google News chief Richard Gingras announced that First Click Free was being replaced by a new policy called “Flexible Sampling.” Instead of being forced to serve up three free articles per day, publishers will instead be able to set their own number of free monthly samples—Google recommends 10 a month.

“Publishers generally recognize that giving people access to some free content is the way to persuade people to buy their product,” Gingras wrote.

Google also promised to work with publishers on making it easier for people to subscribe to their articles. Judging from Monday’s announcement, it appears Google wants to ensure that its services become central to that process.

“As a first step we’re taking advantage of our existing identity and payment technologies to help people subscribe on a publication’s website with a single click, and then seamlessly access that content anywhere—whether it’s on that publisher site or mobile app, or on Google Newsstand, Google Search or Google News,” Gingras said.

The Wall Street Journal quoted News Corp CEO Robert Thomson as saying the move was “an important first step in recognizing the value of legitimate journalism.”

Google and Facebook pretty much own the digital advertising market between them and, if subscription models become the norm, they will be vying for control of that mechanism too. Like Google, Facebook is also working on support for paywalled articles within its social network.

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Microsoft’s budget Windows VR headsets roll out to developers soon
April 7, 2017 6:30 pm|Comments (0)

A lucky few developers will be able to get their hands on a low-cost Windows virtual reality headset starting this month. Microsoft announced Wednesday that the Acer Mixed Reality Developer Edition headset will start rolling out to a handpicked batch of software makers starting the end of March, with more coming later.

This marks the first release of a Windows Mixed Reality headset, which Microsoft first previewed last year. The headsets are supposed to stand out from the crowd because of a lower price and their support for “inside-out” tracking that uses sensors on the device to determine a user’s position, rather than relying on external trackers to gather that information. That’s why Microsoft is calling them mixed reality headsets.

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IDG Contributor Network: IoT security will soon be common in the enterprise, Gartner says
February 22, 2016 11:00 am|Comments (0)

A fifth of all businesses will have deployed IoT-related security by the end of 2017, analyst Gartner thinks.

Dedicated digital security services that are committed to “protecting business initiatives using devices and services in the Internet of Things” will be in place by then, the research and advisory company says.

Gartner made the statement in a press release on its website in relation to a security and risk management summit earlier this month in Mumbai.

‘Reshape IT’

“The IoT redefines security,” Ganesh Ramamoorthy, research vice president at Gartner, said in the press release.

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Soon We’ll All Be Reading Magazines in VR
January 24, 2016 5:30 am|Comments (0)

The world of virtual reality is going to take us to places we’ve never been before—across the globe, or to new, unimaginable planets. Or maybe it will just help you read the New Yorker. Who can say for sure?

The post Soon We’ll All Be Reading Magazines in VR appeared first on WIRED.



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Microsoft launches meeting app Invite for iPhone, coming soon to Android and Windows Phone
November 6, 2015 8:50 am|Comments (0)

One of the meeting rooms at Communitech, a startup mecca in Waterloo, Ontario. Google also has 200 employees here.

Microsoft today launched a new standalone app for scheduling meetings called Invite. Available only for iPhone users in the U.S. and Canada for now, you can download Invite now directly from Apple’s App Store.

Here is how it works. First you suggest times that work for you, and then invite attendees to vote. You can send invites to anyone with an email address — even if they are outside your organization. The recipients select all the times they can attend from the app itself or from a browser, once votes are in, you pick the time that works best.

microsoft_invite

The best part is that anyone invited can see what options work best for other attendees, and suggest their own times as well. The sender chooses a final date and time whenever they’re ready, hitting Send Calendar Invites to get it on everyone’s calendars.

Here is how Microsoft explains its thinking behind the app:

Invite is designed to overcome the biggest obstacle when scheduling meetings — not being able to see the calendars of attendees outside your organization. As a result, your proposed meeting can be repeatedly declined until you find a time that works.

From VentureBeat

Location, location, location — Not using geolocation to reach your mobile customers? Your competitors are. Find out what you’re missing.

Certain events and meetings can be moved if something more important comes up, but only each person knows best where they are flexible. By letting attendees pick times that work for them, even when it means moving one of their own meetings, can stop that meeting from being scheduled on a Friday evening.

Invite is mainly designed for users with Office 365 business and school accounts. That said, the app also works with any email account, including Outlook.com, Gmail, and Yahoo Mail.

The app’s launch and limitations are very similar to Microsoft’s Send, a lightweight email app that debuted in July. Like Send, Invite is starting out as iPhone-only, available only in two countries, and with the promise of “coming soon” to Android and Windows Phone.

Invite is the latest in a long line of apps to emerge from Microsoft Garage, the software giant’s lab for experimental tinkering. At this rate, Microsoft will soon have more experimental apps than “final” apps.

And that’s okay, as long as some of them are eventually released or integrated into existing products.

More information:

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Cape Watch: We May Have Another Vampire Invasion Coming Soon
September 24, 2015 9:40 pm|Comments (0)

Cape Watch: We May Have Another Vampire Invasion Coming Soon

This week, we have a hint at what to expect from one of Marvel’s newest cinematic heroes—and teases of a return from one of its oldest.

The post Cape Watch: We May Have Another Vampire Invasion Coming Soon appeared first on WIRED.



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