EnLink Midstream LLC (ENLC) Update - Feb 4

[dan_s]

ENLC is one of the midstream C-Corps in our High Yield Income Portfolio. It is trading today at $4.10.
Quarterly dividends are $0.09375, or $0.375/year for annual yield of approximately 9.15%.

This one has been in the Wall Street dog house because of a big dividend cut a year ago. IMO it has been in the "penalty box" too long.
> It has been and will continue to generate lots of free cash flow from operations.
> In addition to free cash flow paying down their debt, they recently issued new senior debt to payoff some debt due at the end of 2021.
> All midstream companies have a lot of debt, but EnLink has no serious debt repayment issues as of this date.
> Based on my forecast, EnLink should generate $750 to $800 million of cash flow from operations in 2021 (compared to $825 million in 2020)
> Capital expenditures will be way down this year to (my guess) of less than $250 million. Therefore, plenty of DCF to keep paying dividends and keep paying down debt.
> Based on First Call's revenue forecast of $4.3 Billion for 2021, EnLink should be able to increase dividends in 2H 2021.

My valuation is increased to $5.70 and I expect the Wall Street Gang to raise their price targets if EnLink's guidance confirms my forecast model assumptions. There is no reason that I can see for this company to be trading for less than 3X operating cash flow. A 6X multiple is more appropriate.

This one is a C-Corp, so it is appropriate for an IRA account.