Citi Downgrades Permian Basin Royalty Trust (PBT) to Hold
Citi downgrades Permian Basin Royalty Trust (NYSE: PBT) from Buy to Hold. Price target increased from $17 to $20.
Citi analyst says, “The decision to lower our rating is based on the trust’s current valuation. The units have appreciated by nearly 39.5% since mid December through March 11, 2008 (e.g. which compares favorably to the (14.0) % total return generated by the S&P 500 Index over the same time period), surpassing our 12-month target price of $17.00 per unit. Although we are forecasting the partnership to grow cash flows by approximately 50% from 2007 to 2008 (i.e. due primarily to higher commodity prices), we feel this potential is already factored into its current valuation.”
The Permian Basin Royalty Trust (the Trust) is an express trust. The principal assets consists of a 75% net overriding royalty interest carved out by Southland Royalty Company (Southland) from its fee mineral interest in the Waddell Ranch properties in Crane County, Texas (Waddell Ranch properties), and a 95% net overriding royalty interest carved out by Southland from its major producing royalty properties in Texas (Texas Royalty properties).
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