TWM.TO - Credit Suisse $2 target Tidewater Midstream and Infrastructure Ltd. (TWM-T) “offers niche energy infrastructure exposure in Western Canada at an attractive discounted valuation – especially on a net asset value basis,” according to Credit Suisse analyst Andrew Kuske.
Touting its “renewable runway,” he initiated coverage of the stock with an “outperform” rating on Friday.
“In general, Western Canada’s energy/infrastructure ecosystem offers differentiated exposure versus a number of other regions,” said Mr. Kuske. “Given improving egress (across the hydrocarbon spectrum) along with an overall positive carbon capture opportunity, we like TWM’s asset position and valuation – especially in the context of the stock’s renewable fuels exposure.
“A distinguishing feature for TWM versus other parts of our coverage is the renewable fuels growth potential along with the structural reality. We believe TWM helped surface value along by solving a near-term financial conundrum with the IPO of Tidewater Renewables Ltd. (LCFS-T). That IPO helped showcase the underlying renewable fuels potential and, to us, the valuation dichotomy and discount of TWM. One of the next phases of potential upside looks to be executing on the renewable fuels growth plan. We acknowledge the debate about undue complexity with the creation of LCFS and the legacy concerns associated with the Prince George Refinery (PGR), but these factors look to be excessively discounted in TWM’s valuation, in our view.”
Mr. Kuske established a $2 target for Tidewater shares, exceeding the $1.86 average on the Street.
“We believe Tidewater trades at a discounted valuation – which is partly a function of its unique asset base (midstream and refinery exposure) and market cap (i.e., small-cap status). Given its unique niche regional exposure along with the structure of the renewable fuels business, we believe the stock offers a compelling risk-reward, combined with additional growth potential in light of basin dynamics,” he said.