Westlake Chemical Partners LP (NYSE: WLKP)

Sector: Basic Materials Industry: Chemicals CIK: 0001604665
Market Cap 750.98 Mn
P/B 2.70
P/E 13.85
P/S 0.64
ROIC (Qtr) 48.54
Div Yield % 11.14
Rev 1y % (Qtr) 11.52
Total Debt (Qtr) 399.67 Mn
Debt/Equity (Qtr) 1.53
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About

Westlake Chemical Partners LP (WLKP) is a prominent player in the ethylene production industry, operating and developing facilities that produce this key building block for various plastics and chemicals. The company is a subsidiary of Westlake Chemical Corporation and is publicly traded on the New York Stock Exchange under the ticker symbol WLKP. Westlake Chemical Partners LP's main business activities are centered in the United States, specifically in Lake Charles, Louisiana, and Calvert City, Kentucky, where its ethylene production facilities...

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Investment thesis

Bull case

  • Strong operating cash flow of 292.56M provides robust 0.73x coverage of total debt 399.67M, indicating excellent debt servicing capability and financial flexibility.
  • Operating cash flow of 292.56M provides exceptional 12.63x coverage of interest expenses 23.16M, showing strong debt service capability.
  • Strong tangible asset base of 1.27B provides 3.17x coverage of total debt 399.67M, indicating robust asset backing and low credit risk.
  • Strong operating cash flow of 292.56M provides 10.53x coverage of SG&A expenses 27.78M, showing efficient operational cost management.
  • Robust free cash flow of 209.10M exceeds capital expenditure of 83.46M by 2.51x, indicating strong organic growth funding capability.

Bear case

  • Operating cash flow of 292.56M provides thin coverage of dividend payments of (66.45M) with a -4.40 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 37.94M provide limited coverage of acquisition spending of 95M, which is 0.40x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • High receivables of 89.20M relative to inventory of 3.08M (28.98 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Operating earnings of 72.87M show weak coverage of depreciation charges of 120.90M, with a 0.60 ratio indicating high capital intensity and potential reinvestment needs.
  • High depreciation of 120.90M relative to operating cash flow of 292.56M, which is 0.41x suggests significant maintenance capital requirements affecting free cash flow.

Peer comparison

Companies in the Chemicals
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 DOW Dow Inc. 22.27 Bn -8.49 0.56 19.60 Bn
2 CE Celanese Corp 6.07 Bn 3.05 0.57 13.13 Bn
3 MEOH Methanex Corp 4.41 Bn 45.97 2.24 3.64 Bn
4 OLN OLIN Corp 3.95 Bn 50.79 0.65 3.30 Bn
5 HUN Huntsman CORP 2.92 Bn 8.95 0.39 2.40 Bn
6 REX REX AMERICAN RESOURCES Corp 1.12 Bn 22.21 1.72 0.02 Bn
7 TROX Tronox Holdings plc 1.06 Bn -9.74 0.40 3.46 Bn
8 GPRE Green Plains Inc. 0.89 Bn -7.32 0.42 0.57 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.86 0.76
EV to Cash from Ops. EV/CFO 2.65 10.63
EV to Debt EV to Debt 2.73 4.16
EV to EBIT EV/EBIT 13.52 -392.22
EV to EBITDA EV/EBITDA 2.34 11.31
EV to Free Cash Flow [EV/FCF] EV/FCF 2.97 18.26
EV to Market Cap EV to Market Cap 1.45 1.76
EV to Revenue EV/Rev 0.94 4.23
Price to Book Value [P/B] P/B 2.70 1.69
Price to Earnings [P/E] P/E 13.85 -53.47
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.74 -12.67
Dividend Payout Ratio % Div Payout % (Qtr) 135.60 17.68
Dividend per Basic Share Div per Share (Qtr) 1.89 0.50
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 31.77 1,007.72
Interest Coverage Int. cover (Qtr) 3.15 -82.93
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -72.66 22.09
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -36.99 4.03
Dividend Growth (1y) % Div 1y % (Qtr) -0.05 -8.48
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -18.02 -121.97
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -12.15 -25.84
EBIT Growth (1y) % EBIT 1y % (Qtr) -18.21 -147.36
EBT Growth (1y) % EBT 1y % (Qtr) -20.51 -143.26
EPS Growth (1y) % EPS 1y % (Qtr) -20.11 -108.77
FCF Growth (1y) % FCF 1y % (Qtr) -49.23 -91.55
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -16.96 0.31
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.89 0.63
Cash Payout Ratio Cash Payout (Qtr) 0.18 0.07
Cash Ratio Cash Ratio (Qtr) 0.69 1.02
Current Ratio Curr Ratio (Qtr) 2.37 2.84
Debt to Equity Ratio Debt/Equity (Qtr) 1.53 1.19
Interest Cover Ratio Int Coverage (Qtr) 3.15 -82.93
Times Interest Earned Times Interest Earned (Qtr) 3.15 -82.93
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 17.10 -96.08
EBIT Margin % EBIT Margin % (Qtr) 6.43 -110.82
EBT Margin % EBT Margin % (Qtr) 4.38 -114.07
Gross Margin % Gross Margin % (Qtr) 30.80 10.84
Net Profit Margin % Net Margin % (Qtr) 4.30 -117.97