BMOFebruary 25, 2022 | 05:30 ET~ Pembina Pipeline PPL-TSX Rating Market Perform Price: Feb-24 $41.84 Target ↑ $43.00 Total Rtn 9%
Q4 - Big Beat and Finger Still on the Play Button; Maintain Market Perform Bottom Line:
Newly appointed CEO Scott Burrows characterized 2021 as hitting "play" once again after being on "pause" in 2020. The results clearly supported that view with record adj. EBITDA exceeding the top end of guidance and the re-start of several deferred projects last year. Also, volumes continue to recover, Marketing is providing a nice windfall, and the balance sheet can still self-fund $2B of capex per annum ($665M budgeted for 2022). These positive trends should continue into 2022 (target price to $43 vs. $41) and we maintain our Market Perform rating.
Key Points Q4/21 well above expectations; exceeds annual guidance. Q4/21 adj. EBITDA came in at $970M (Q4/20 of $866M), well above consensus of $896M and our $886M. The positive variance was mainly due to Marketing ($183M vs. our $110M) as Pipelines ($548M vs. our $549M) and Facilities ($285M vs. our $277M) were close to our expectations.
In turn, full-year results of $3,433M (+5% YoY) came in above the top end of the guidance range of $3.3-$3.4B. PPL also repurchased $17M of common shares during the quarter, reinforcing the attractiveness of its share price (EV/EBITDA of 10.7x vs. midstream peers 11.5x).
Conf call Feb. 25 10 a.m. ET; 1-800-437-2398 or 647-792-1240.
Thoughts on the outlook. PPL reaffirmed its 2022E EBITDA range of $3.35-3.55B, which is effectively flat vs. 2021 contribution. Key drivers include higher volumes, Marketing/ strong frac spreads and new organic growth ($900M of projects in-service i.e., Peace Pipeline Phase VII mid-2022; IX H2/22; and Empress Cogen Q4/22). However, this will be partially offset by higher integrity spend and contract expirations (i.e. Ruby).
Thoughts on the stock. Hard not to see the stock outperform over the near-term on a relative basis with ~8% EBITDA beat to consensus, 2022 guidance reaffirmed, organic projects on track, and improved visibility to C-suite. The next notable catalyst will be sanctioning of new projects (Prince Rupert expansion potential sanctioning decision in Q1/22 and Phase VIII Peace 1H/22) and further capital return (potential dividend increase as early as spring and/or continued share buybacks).
Raising estimates. We have updated our model to reflect Q4/21 results and higher Marketing/frac spread contribution. 2022E EBITDA to $3,445M (vs. $3,393M) and 2023E EBITDA to $3,499M (vs. $3,433M). Key Changes Target $43.00↑ $41.00 Estimates Q1 / 22E 2022E 2023E CFPS $1.16 $4.75 $4.60 Previous $1.11 $4.49 $4.34 DCF/Sh $1.01 $4.11 $3.97 Previous $0.97 $3.91 $3.76