In a June 10 research note, Raymond James analyst Justin Jenkins reported that Martin Midstream Partners L.P. (MMLP:NASDAQ) agreed to sell Cardinal Gas Storage, its Arcadia, Cadeville, Monroe and Peryville assets, to the private company Hartree Cardinal Gas for $215 million in cash.
The Cardinal assets comprise about 50 billion cubic feet of storage capacity in Mississippi and northern Louisiana. Closing of the transaction is expected at the end of Q2/19.
Jenkins noted the divestiture should achieve two ends for Martin Midstream: stabilize its balance sheet and improve its equity performance.
The master limited partnership's reason for the assets sale was to delever its balance sheet and focus solely on its refinery services operations. Indeed, Jenkins wrote, the transaction should significantly reduce leverage, particularly because the assets are to be sold "at an attractive roughly 10.5x multiple," generating more revenue than expected.
In turn, the leverage reduction should boost the stock price, currently $6.63 per share, over time. This "should be welcome news to investors after the stock's difficult run over the past few weeks (down 8.2% last week and 17.2% in the past month)," Jenkins commented.
The next catalyst for the partnership, Jenkins noted, is stability of Q2/19 earnings.
Raymond James has an Outperform rating on Martin Midstream.
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Disclosures from Raymond James, Martin Midstream Partners L.P., June 10, 2019
ANALYST INFORMATION
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The analysts Justin Jenkins and J.R. Weston, primarily responsible for the preparation of this research report, attest to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers and that no part of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views in this research report. In addition, said analyst(s) has not received compensation from any subject company in the last 12 months.
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