UBS downgrades Holly Energy Partners (HEP) to Neutral: Although we view HEP units as a low-risk way to gain exposure to crude oil and refined product transportation, terminaling, storage and throughput services in the
Southwest and Rocky Mtn regions, HEP units have had a significant run (up 28% since end of Sept 2011). While we are increasing our 2012-13 EPU ests by 12% and 18%, resp, and see modest upside to our ‘12e distribution growth of 4.6%, we downgrade HEP to Neutral on valuation given our DDM model. We do, however, increase our PT from $58 to $64.
UBS ups price target on Genesis Energy LP (GEL): GEL recently raised its quarterly distribution to $0.44 per unit, a 10% hike over 4Q10. This was the 26th consecutive quarter in which GEL increased its distribution; 21 of these quarterly increases have been 10% or greater year-overyear. We project continued strong distribution growth, and are increasing our 2013-16 projections to reflect recent $0.01/quarter distribution increases (~8% growth/yr). We increase our PT from $28 to $33 and maintain our Buy rating.