New Position: PBF Logistics LP
Today I am issuing a buy recommendation to establish a new or additional position in PBF Logistics LP (NYSE: PBFX).
The PBFX unit value is down about 8% today on the news of a 2.5 million unit common equity issuance. The company will use the proceeds from selling the new common units to pay for the previously announced acquisition of four refined product terminals located in the greater Philadelphia area.
Prior to the energy sector Bear Market, this type of financing was commonly used to pay for growth projects. The acquisition is priced to be cash flow accretive and to allow for future distribution growth. Way back before the Fall of 2014, share value declines associated with an equity issuance were great buying opportunities as the share price soon recovered.
PBFX has been steadily growing its distribution by 5% every quarter. When the first quarter earnings results are released in late April/early May I expect the company to announce another 5% to 6% increase in the distribution. If the unit price has not recovered by then, the distribution announcement will definitely give a boost to the PBFX value.
In the 30 Day Dividends positions list, there is an existing open trade on PBFX dating back to September 2014. That position will remain open as I wait for the entire MLP sector to complete its recovery from the energy Bear market. The trade announced today is new and if you have an existing position in PBFX, buy more and sell the added units when the target price is reached.
PBFX is an MLP and tax reports on a Schedule K-1.
Recommendation: Buy PBFX up to $18.70.
Target sell price is $20.20 for an 8% gain. I will adjust the target based on today’s (March 31st) closing price for PBFX. The goal is to hit the target before PBFX goes ex-dividend in mid-May.