- Genesis Energy is an over-levered small-cap midstream MLP that cut its distribution last year from $2.20/unit to $0.60/unit, and the stock collapsed amid the onset of Covid19.
- However, the outlook for Genesis is much brighter due to a likely ~1/3 increase in EBITDA in the next ~3 years with minimal capital investment.
- The increase in EBITDA to come from already contracted incremental volumes on Genesis pipelines as well as expansion of capacity for a key product used in lithium ion battery production.
- Genesis Energy trades very cheap at just 7x 2022E EBITDA and 6.5x 2023E EBITDA. Assuming just a 9x 2023E EBITDA valuation, Genesis units could more than double.
- But there's more: The expected increase in EBITDA means not only a much stronger balance sheet but also a likely tripling in distributions/unit implying a yield to current stock price of over 20% by YE2023.
For further details see:
Genesis Energy: Why We Believe The Units Could Triple Over The Next 3 Years