PBF Logistics (NYSE: PBFX), a midstream partnership formed by PBF Energy (NYSE: PBF), went public in May 2014 as the primary vehicle for expanding its sponsor’s base of logistics assets. PBF Energy owns 52.1% of PBFX, 100% of the general partner (GP) and the incentive distribution rights (IDRs).

PBFX supports crude oil logistics for three PBF Energy refineries and will own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. Thus, it is an MLP in the same vein as Phillips 66 Partners (NYSE: PSXP) and MPLX (NYSE: MPLX), with one major difference: PBFX is relatively inexpensive compared to those two MLPs, and offers a much higher yield.

PBFX went public with assets consisting of a 105,000 barrel per day (bpd) light crude oil rail unloading terminal at PBF’s Delaware City, Delaware refinery that also serves its Paulsboro,  New Jersey, refinery, and a crude oil truck unloading terminal at PBF’s refinery in Toledo, Ohio, that facilitates crude oil delivery operations for all three refineries.

The Delaware City Rail Terminal has since been expanded to an unloading capacity of 130,000 bpd, and the Delaware City West Rack and the Toledo Storage Facility have been dropped down from PBF Energy. These two dropdowns are projected to boost annualized EBITDA of the partnership by more than 70% relative to annualized Q3 2014 EBITDA.

The Delaware City West Rack is a 40,000 bpd heavy crude oil rail unloading facility located at PBF Energy’s Delaware City refinery, but it is also capable of unloading light crude oil. The facility was acquired for $150 million and is expected to contribute $15 million of EBITDA annually to the partnership. The transaction closed on Sept. 30.

The Toledo Storage Facility is co-located with PBF Energy’s Toledo refinery, and provides approximately 3.9 million barrels of combined feedstock and product storage capacity, including a propane storage and loading facility. The tank farm and propane loading activities are expected to contribute approximately $15 million of EBITDA annually, and are supported by a 10-year terminaling and throughput agreement. This facility was also acquired for $150 million and the transaction closed on Dec. 11.

The $30 million in EBITDA these two acquisitions are expected to add is a substantial number considering that annualized EBITDA for Q3 2014 was $42 million. Even though Q4 results only reflected a partial quarter of results from the Toledo Storage Facility, annualized EBITDA rose to $70.4 million. The partnership also announced distributable cash flow of $16.7 million for Q4, and declared a quarterly distribution of $0.33/unit — a 10% increase over the Q3 distribution.

On the conference call discussing the Q4 results, the CFO said assets currently generating another $100 million to $125 million of EBITDA for the parent are available to be dropped down. Among them are marine terminals on the East Coast, additional storage facilities at Delaware City and Paulsboro, refined products pipelines, a heavy crude terminal, and miscellaneous rail terminals, truck racks and liquefied petroleum gas (LPG) loading and unloading facilities. Given the expected ~$72 million of EBITDA in 2015 from existing assets, the drop-down of assets contributing an additional $100 million or more implies strong distribution growth ahead for PBFX.

Yet the valuation of PBFX is very attractive relative to aforementioned peers PSXP and MPLX. Based on expected EBITDA in 2015 of $72 million (before additional drop-downs), PBFX trades at an Enterprise Value (EV) to EBITDA ratio of ~16. By contrast, PSXP trades at a trailing EV/EBITDA ratio of 41, while MPLX has a trailing EV/EBITDA ratio of ~26. PSXP and MPLX sport annualized yields below 2%, while PBFX is offering a respectable 5.6%.

Despite the 10% distribution increase in Q4, the current 5.6% yield, and an impressive portfolio of assets still to be dropped down, PBFX is trading 15% below its May IPO price. Several of the MLPs that have been formed by dropping down refinery assets are expensive. PBFX appears to be a real value among its peers.

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