11/19/09 Breaking News – Growth MLP & Aggressive MLP

Growth Portfolio holding DCP Midstream LP (NYSE: DPM) and Aggressive Portfolio bellwether Navios Maritime Partners (NYSE: NMM) priced secondary offerings of units this morning.

It’s been a busy week for secondary offerings; just two days ago, we sent out an Alert concerning Growth Portfolio holding Teekay LNG Partner’s (NYSE: TGP) offering of 3.5 million units.

Today, Navios Maritime Partners announced that it’s selling 4 million units at $14.90 with an additional 600,000 unit over-allotment option, raising more than $68 million before fees. And DCP Midstream announced a 2.5 million unit offering at a price of $25.40 per unit, plus an over-allotment option for an additional 375,000 units. That offering raises around $73 million before underwriting fees.

Our take on both offerings is the same as our advice on Teekay: Investors should regard the dip in the units of Navios and DCP as a buying opportunity. In fact, the drop in Navios’ units gives new investors an opportunity to buy the MLP that has been trading above our Buy target for the past few days.

Whenever a company issues new units (the MLP equivalent of shares), it dilutes the value of existing unitholders’ stakes in the firm. However, this is not a concern in either case because both MLPs are likely to deploy the cash to make new acquisitions or fund organic expansion projects. In short, MLPs are using the funds they raise to buy or build assets that generate cash flow, which translates into higher distributions for unitholders.

Over the past several months, a number of MLPs have raised cash by taking on debt or issuing new units. In each case, any dip following secondary unit issues has proven an outstanding buying opportunity. This occasion is no different.

Buy DCP Midstream LP below 27 and Navios Maritime Partners below 15.  

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