Comments Globe For those interested the following was in the G&M May 10
Citing its “history of conservatism,” RBC Dominion Securities analyst Robert Kwan thinks investors should not be concerned by Pembina Pipeline Corp.’s (
) decision to not raise its 2021 earnings guidance.
“While we believe actions speak louder than words in this market, we also believe Pembina is an outlier when it comes to its 2021 EBITDA guidance,” he said. “We would read nothing into Pembina not raising guidance and instead focus on the company’s commentary on its Q1/21 conference call and history of conservatism. If all Pembina did was deliver flat results for Q2-Q4 versus 2020, EBITDA would be roughly at the mid-point of its 2021 guidance range despite new projects coming into service throughout 2021 (e.g., Prince Rupert Terminal; Hythe expansion), volume improvement from 2020 and higher commodity prices.”
Mr. Kwan emphasized new growth projects appear to be “on the horizon,” noting: “With the current 2021 capital plan being fully funded by retained cash flow (i.e., no new debt), which will naturally deleverthe balance sheet, we believe it is increasingly likely that the company will announce the restart of previously mothballed projects (e.g., Phases VIII and IX forthe Conventional Pipelines) driven by a recovery in producer activity as well as EBITDA for 2021 coming in above management’s expectations (i.e., additional cash flow will create balance sheet capacity to fund 2022 capex).”
Mr. Kwan emphasized new growth projects appear to be “on the horizon,” noting: “With the current 2021 capital plan being fully funded by retained cash flow (i.e., no new debt), which will naturally delever the balance sheet, we believe it is increasingly likely that the company will announce the restart of previously mothballed projects (e.g., Phases VIII and IX for the Conventional Pipelines) driven by a recovery in producer activity as well as EBITDA for 2021 coming in above management’s expectations (i.e., additional cash flow will create balance sheet capacity to fund 2022 capex).”
Despite that optimism, Mr. Kwan trimmed his 2021 and 2022 EBITDA and adjusted funds from operations per share estimates to reflect a weaker U.S. dollar.
Keeping an “outperform” rating for Pembina shares, he raised his target to $42 from $40. The average is $39.15.
“We continue to view the stock as having attractive total return potential based on a combination of the dividend yield and our expected upside in the share price,” he said.
Elsewhere, National Bank Financial analyst Patrick Kenny raised his target to $39 from $38 with a “sector perform” rating and ATB Capital Markets’ Nate Heywood raised his target to $40 from $39 also with an “outperform” recommendation.