Kinder Morgan Upgraded to Buy

We have upgraded Kinder Morgan (KMP - Analyst Report), the largest independent owner and operator of petroleum product pipelines in the U.S., to Buy from Hold on valuation grounds.

We believe that the recent broad MLP-group sell-off in general and KMP weakness in particular is overdone and provides for excellent buying opportunities. Distributions are safe as evident from KMP's just-announced distribution increase.

For the third quarter of 2008, the partnership announced a 16% increase in distribution to the annualized run rate of $4.08 per unit. We believe that MLP valuations are at extremely attractive levels.

Given its diversified business mix and comfortable distribution coverage ratio, we believe the partnership can easily maintain a distribution growth rate of around 8% annually over the next few years. With over $3 billion of organic projects beginning to come online over the next few years, we see favorable long-term growth profile for KMP.

Read the full analyst report on KMP

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