RE:RE:Comments from RBC this morningBlueJay2020 wrote: What I find most interesting is the impact of multiples on the SP. Just moving from 11 to 11.5 adds 5 bucks a share, and thats still only the midpoint of the historical trading range. I think their base case is unnecessarily conservative and $48 is not unreasonable, especially when the IPL deal goes through.
hawk35 wrote:
June 15, 2021
Pembina Pipeline Corporation
Keeping the ball rolling in the right direction
Valuation
Our $42.00/share price target is based on an EV/EBITDA
multiple of 11x and includes no upside from the mothballed
growth initiatives. For much of the last 15 years, Pembina’s
shares have traded within a range of roughly 10–13x EBITDA.
We believe a valuation in the lower half of the range is
appropriate given the continued uncertainty with respect to
energy markets. We believe that the relative risk-adjusted
expected total return to our price target supports our
Outperform rating on the shares.
Upside scenario
Our $48.00 per share upside scenario is based on our predownturn
valuation of 11.5x EBITDA applied to our 2022
estimate plus roughly $1.00/share for deferred projects that
have been mothballed in the current environment but could
move forward in the future (e.g., Phase VIII and IX). The EV/
EBITDA valuation is modestly higher than the group average,
reflecting the high proportion of cash flow derived from
the NGL pipeline and terminal infrastructure, primarily under
take-or-pay contracts.
Take a look at the chart (Change in Enterprise Value/EBITDA) in the bottom right corner of this link:
https://www.marketscreener.com/quote/stock/PEMBINA-PIPELINE-CORPORAT-1411251/financials/
I don't know how accurate this data is but the average shows 14.42 which compared to where we are seems high. But according to the maths presented that gives a runway of $60.80 upside without the addition of Interpipe.
14.42 - 8.34 = 6.08 (difference of current EV/EBITDA to average presented)
6.08 divided by .5 = 12.16 (the difference divided by the .5 presented in the article = multiple of differences)
12.16 X $5 = $60.80 (The multiple of differences times the $5 share price appreciation per multiple)
$60.80 is the potential upside of price to thier model to the historical data.
If I take thier current EV/EBITDA number and divide it by their current target price I get 3.818, multiply that with thier 11.5 model = $43.91 for thier new target price and they say add $1 for the deferred projects = $44.91, I don't understand where the $48 comes from...
If I take that 3.818 and apply it to the historical average of 14.42 it equals $55.05 of share price based on average.
If I look at thier future target price based on the 11.5 model I get 4.174, multiply by historical average $60.19
I've done all this to try and understand thier idea of pricing the stock with the use of EV/EV/EBITDA as a measurement.
To either me, my maths are wrong, their maths are wrong but that measurement seems weird. I also think that historical data is high for the new climate the past few years. (If my maths are off please tell me so I can understand where I've gone wrong)
I don't disagree with thier targets and I too feel it is pretty conservative, but I find the reasoning difficult to wrap my head around by the info base they have given...