Several Raises G&M =====
In response to the close of the US$275-million sale of its U.S. Transportation and Storage business, a group of equity analysts raised their targets for AltaGas Ltd. (
) ahead of the release of its first-quarter results on Thursday before the bell.
IA Capital Markets analyst Elias Foscolos said the sale to an entity owned by Six One Commodities LLC and Vega Energy Partners “further simplifies” AltaGas’ operations, “allowing the company to focus on its core Utilities and Midstream businesses while continuing to deleverage.”
Keeping a “buy” rating, Mr. Foscolos raised his target to $25.50 from $24.50. The average on the Street is $23.47.
“We believe ALA is well-positioned through its high-quality Utilities and Midstream platforms and clear strategic directive emphasizing disciplined and low-risk growth,” he said.
Others making adjustments include:
* Raymond James’ David Quezada to $24 from $22.50 with an “outperform” rating.
“Based on this historical profitability, we peg transaction metrics at a relatively attractive 13.0 times (2020 EV/EBITDA) and 17.0 times (EV/5 yr. average EBITDA),” he said. “While 2021 results were clearly on pace for a much greater EBITDA contribution (implying a lower 2021 transaction multiple), we would not expect this level of performance to be sustainable as it reflects extremely favourable conditions this quarter from historically cold weather and volatile natural gas prices. For reference, we had forecasted FY2021 EBITDA of $25 mln for the storage and transportation business, which multiplied through by our 11 times EV/EBITDA multiple in our sum of parts valuation, implies a value of $275-million vs. the $344-million sale price. We consider this to be a very attractive monetization and expect the stock to trade higher. Further, this sale comes on the heels of an extremely profitable period for the assets.”
* CIBC World Markets’ Robert Catellier to $26 from $25 with an “outperformer” rating.
* Scotia Capital’s Robert Hope to $25 from $24 with a “sector outperform” rating.
* National Bank Financial’s Patrick Kenny to $25 from $24 with an “outperform” rating.