Take Another Look at PBF Logistics
Yesterday (Thursday, Feb 12) PBF Logistics LP (NYSE:PBFX) released 2014 fourth quarter earnings and announced a 10% distribution increase compared to the previous quarter. PBFX is a newer midstream MLP, which had its IPO in May 2014. This was really the first chance for the MLP to institute a distribution increase, and it was a dandy.
I was ahead of the curve (and also ahead of the crude price crash) when I added PBFX to the 30 Day Dividends recommended positions list in September 2014. With the Q4 sell-off in all energy related companies, the PBFX unit price is about 10% below the entry price for the newsletter. The earned Q3 distribution reduces the tracking loss by 2.25%. My point is that even though PBFX jumped 4.6% on the earnings and distribution news, the units are still undervalued in relation to the growth potential.
PBFX now yields 5.8% on the new $0.33 distribution rate. I listened to the earnings conference call, and when pressed, management admitted to a mid-teens distribution growth potential. Reading between the words spoken during the call, I think management really believes the 3 cent increase announced this quarter could be the norm for the foreseeable future.
Right now, small cap MLPs are swinging up and down with the price of crude. The PBFX revenues and EBITDA are not in any way affected by changing crude prices. It will take a couple of quarters, but I think that when the market eventually realizes that this is a top tier growth MLP, it should be valued like those refinery company logistics MLP spin-offs with 20% plus distribution growth rates. This means a max yield of 4.5%, which would put the PBFX unit price at $34, assuming two more 3 cent distribution increases and a 4.5% yield. That projected unit price would generate a greater than 50% total return gain over the next two to three quarters from the current value. Let’s see if my scenario works out.
Finally, I will publish an article on Seeking Alpha covering PBFX over the next couple of days. I don’t have a lot of power to move stock prices, but the article may give a push. Just wanted to give my 30 Day Dividends subscribers a running head start.