Martin Midstream Partners LP – Value Analysis (NASDAQ:MMLP) : December 18, 2017

Capitalcube gives Martin Midstream Partners LP a score of 28.

Our analysis is based on comparing Martin Midstream Partners LP with the following peers – NGL Energy Partners LP, Enterprise Products Partners L.P., Arc Logistics Partners LP, Plains All American Pipeline, L.P., Cheniere Energy, Inc., Southcross Energy Partners, L.P., Chevron Corporation, Kirby Corporation, Ferrellgas Partners, L.P. and Genesis Energy, L.P. (NGL-US, EPD-US, ARCX-US, PAA-US, LNG-US, SXE-US, CVX-US, KEX-US, FGP-US and GEL-US).

Investment Outlook

Martin Midstream Partners LP has a fundamental score of 28 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • It currently trades at a Price/Book ratio of (1.94).
  • MMLP-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • MMLP-US has relatively low net profit margins while its asset efficiency is relatively high.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • MMLP-US‘s return on assets has improved from below median to about median among its peers over the last five years.
  • The company’s relatively low gross and pre-tax margins suggest a non-differentiated product portfolio and not much control on operating costs relative to peers.
  • While MMLP-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • MMLP-US seems too levered to raise additional debt.

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Leverage & Liquidity

MMLP-US would seem to have a hard time raising additional debt.

  • With debt at a relatively high 55.12% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 51.99%), and relatively tight interest coverage level of 1.05x, MMLP-US would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • All 10 peers for the company have an outstanding debt balance.

MMLP-US has maintained its Limited Flexibility profile from the recent year-end.

  • MMLP-US‘s interest coverage is its lowest relative to the last five years and compares to a high of 2.32x in 2012.
  • Compared to 2016, interest coverage has remained relatively stable for both the company (1.05x) and the peer median (1.05x).
  • MMLP-US‘s debt-EV is similar to last year’s high of 55.12%, which compares to a low of 36.84% in 2012.
  • Though its debt-EV has remained relatively stable at 55.12% compared to 2016, its peer median has increased to 51.99% from 47.20% during this period.
  • Relative to peers, debt-EV fell 4.80 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
NGL Energy Partners LP 65.39 1.56 0.57 8.23
Enterprise Products Partners L.P. 29.54 0.71 3.18 18.65
Arc Logistics Partners LP 39.14 0.96 1.75 20.95
Plains All American Pipeline, L.P. 40.3 1 2.66 13.08
Cheniere Energy, Inc. 69.1 3 0.75 3.8
Southcross Energy Partners, L.P. 88.47 1.06 -0.87 5.14
Chevron Corporation 16.16 1.04 1.45 45.63
Kirby Corporation N/A 1.93 9.7 47.67
Ferrellgas Partners, L.P. 85.51 0.58 0.63 3.62
Genesis Energy, L.P. 48.87 1.62 0.98 10.67
Martin Midstream Partners L.P. 55.12 2.04 1.05 13.07
Peer Median 51.99 1.06 1.05 13.07
Best In Class 16.16 3 9.7 47.67

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Company Profile

Martin Midstream Partners LP is engaged in the diverse set of operations focused primarily in the United States Gulf Coast region. The company operates through the following segments: Terminalling and Storage, Natural Gas Services, Sulfur Services and Marine Transportation. The Terminalling & Storage segment owns or operates marine shore-based terminal facilities and specialty terminal facilities located primarily in the U.S. Gulf Coast region that provides storage, refining, blending, packaging, and handling services for producers and suppliers of petroleum products and by-products, including the refining of naphthenic crude oil and the blending and packaging of various grades and quantities of industrial, commercial, and automotive lubricants and greases. The Natural Gas Services segment distributes natural gas liquids. It purchases NGLs primarily from refineries and natural gas processors. The segment stores and transports NGLs for wholesale deliveries to refineries, industrial NGL users in Texas and the Southeastern U.S, and propane retailers. The Sulfur Services segment develops an integrated system of transportation assets and facilities relating to sulfur services. It processes and distributes sulfur produced by oil refineries primarily located in the U.S. Gulf Coast region. This segment buys and sells molten sulfur on contracts that are tied to sulfur indices and tend to provide stable margins. The Marine Transportation segment operates a fleet of inland marine tank barges, inland push boats, offshore tug, and barge unit that transport petroleum products and by-products largely in the U.S. Gulf Coast region. Martin Midstream Partners was founded in 2002 and is headquartered in Kilgore, TX.

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