In recent weeks we have discussed the impending IPOs of Black Stone Minerals (NYSE: BSM) and Enviva Partners (NYSE: EVA). Our advice was to avoid BSM, which generates revenues primarily via mineral royalties.

Enviva, on the other hand, is the first publicly traded MLP based on the production and sale of wood pellets, and looked more interesting. It is in a fast-growing business, and one that is likely to become increasingly important in the future. I noted last week that “MLP investors who would like to make more investments in renewable energy will find a lot to like here.”

Investors have thus far agreed.

Enviva priced its units at $20, for a projected annualized yield of 8.25%. They opened at $21 and closed the first day of trading at $21.50 for a gain of 7.5%. The price remains right at that level. Black Stone Minerals priced at $19 for a 5.5% yield. Units opened at $19.15, but then closed down nearly 5% from the opening price. As I write this the decline has continued, with BSM trading at $17.51, down nearly 8% from the IPO price.

There is now one more IPO in the works. On April 20 GPM Petroleum (GPMP) filed paperwork with the SEC to raise up to $100 million. GPM Investments (GPM) is the sponsor of this wholesale distributor of motor fuels, which sells them at a fixed fee per gallon to convenience stores and third parties.

As of April 15, GPM controlled over 500 convenience stores selling motor fuel, snacks and other merchandise to motorists in the Mid-Atlantic, Southeastern, Midwestern and Northeastern United States. GPMP is one of the largest independent motor fuel distributors in the United States based on the number of its stores and the largest distributor of Valero-branded motor fuel on the East Coast.

Following the IPO, GPM will purchase the majority of its motor fuel from GPMP. In 2014 GPMP distributed 461.7 million gallons of motor fuel to GPM-controlled convenience stores and 68.7 million gallons of motor fuel to third-party customers. It also received rental income from real estate leased to third parties. The annual volume of motor fuel sold grew from 296 million gallons in 2011 to 450 million gallons in 2014. The increase was primarily a result of convenience store acquisitions by GPM.

Adjusted EBITDA of the partnership’s predecessor increased from $15.3 million in 2013 to $31.6 million in 2014, primarily as a result of acquisitions. Cash available for distribution last year would have totaled approximately $20.8 million.

The initial filing did not specify the projected minimum quarterly distribution, nor projected revenue, profits, or cash available for distribution for the next 12 months. Until these blanks are filled in, it’s impossible to determine the value of this partnership relative to its peers.

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Portfolio Update

Navios Light on Cash  

Navios Maritime Partners’ (NYSE: NMM) whale of a dividend is yielding an annualized 14.1% after the unit price dropped 5% Monday following rather weak first-quarter earnings.

Slumping dry bulk charter rates kept cash earnings flat year-over-year despite recent additions of the more profitable (and accordingly more expensive) container ships. Including the one added last month there are now eight container ships among the 31 vessels in the NMM fleet, accounting for almost half of the expected 2015 cash flow and two-thirds of all currently contracted revenue.

By acquiring container ships on long-term charters Navios shipping tycoon Angeliki Frangou has essentially been buying time for the dry bulk shipping market to emerge from its deep depression. So far, that ship still hasn’t come in.

Frangou has mustered sufficient resources (starting with access to inexpensive debt) to eliminate the partnership’s exposure to spot bulk rates for the balance of the year and to vouchsafe for the current distribution level through the end of 2016.

But let’s be clear  that the call option on happier shipping news that is NMM doesn’t really generate enough income to support its current distribution at the moment. Not counting the recently delivered container ship and another one Navios has an option to buy, the operating surplus that enables distributions covered just 80% of the quarterly payout. Adding the projected (but not yet realized) contributions from those two ships would have only boosted the coverage to 1.04x.

Even those underwhelming numbers required a big reduction in reserves for maintenance and replacement. Which means that Navios Maritime Partners might really only be earning enough to fully cover a 9% yield right now. On the plus side, its 2015 revenue is now essentially fixed and its determination to maintain the current payout is backed by cheap debt that mostly doesn’t come due until 2018.

NMM offers a call option on a shipping recovery that could very well pan out. But it’s time to be more discerning about its time value and price. We’re lowering the buy limit on NMM to $12 to better reflect the partnership’s risks and the industry’s weak current state.

— Igor Greenwald